Re­cov­er­ing well

Finweek English Edition - - Marketplace - By Mox­ima Gama

south Africa’s big four banks – FirstRand, Stan­dard Bank, Bar­clays Africa and Ned­bank – have shown sur­pris­ing re­silience de­spite the tough eco­nomic en­vi­ron­ment, even test­ing prior highs on their charts that were last tested in 2015.

How­ever, FirstRand’s Group CEO Jo­han Burger says the state of the econ­omy has left banks with lit­tle room to ex­tend credit, a sit­u­a­tion that is ex­pected to con­tinue for the next two to three years. Earn­ings growth has been boosted by cost con­tain­ment and lower im­pair­ments, rather than rev­enue growth, Bloomberg re­ported.

On the chart:

Though the up­trend was choppy, FirstRand has man­aged to re­cover its 2015 losses by retest­ing its all-time high at 5 850c/share in Au­gust. Cur­rently pulling back from a mega-over­bought po­si­tion, FirstRand would have to re­tain its cur­rent up­trend to over­come the 5 850c/share mark.

How to trade it:

Go long: Sup­port re­tained above 4 930c/share – thereby form­ing an­other ris­ing bottom – would in­crease the chances of FirstRand breach­ing its all­time high at 5 850c/share and com­menc­ing a steeper new bull phase. An­other buy­ing sig­nal would be trig­gered above that level, with medium term up­side po­ten­tial to 7 895c/share.

Go short: FirstRand could fail to breach its all-time high and re­trace in­stead – sig­nalled be­low 4 930c/share. Down­side to ei­ther the sup­port trend­line of its pri­mary bull trend or to the prior low of 3 660c/share could fol­low. In which case, go short be­low 4 930c/share and in­crease po­si­tions be­low 4 325c/share. ■

SOURCE: Me­taS­tock Pro (Reuters)

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