technology group EOH said earlier in September that it expects headline earnings per share to increase by between 10% and 20%, disappointing investors who have become accustomed to higher growth rates from the group.
EOH’s share price has been declining since October 2016 after encountering major resistance at 18 000c/share. It was placed under further pressure after the abrupt departure of CEO Asher Bohbot in June after almost 20 years, and following the publication of corruption allegations in July involving a contract with the South African Social Security Agency (Sassa). EOH denied any wrongdoing in its Sassa dealings. On the chart:
EOH is testing the support trendline of its long-term bull trend, and the three-week relative strength index (RSI) has been falling since September 2016. If EOH holds firmly on that trendline and recovers, current levels will look attractive.
How to trade it:
Go long: If EOH holds above its major support trendline, and the three-week RSI forms rising bottoms, EOH will most likely escape its bear trend. A move above 11 750c/share would be bullish. A good buying opportunity would be presented above 12 400c/share – provided that the RSI trades out of its one-year bear trend. A recovery towards 14 865c/share could then ensue. Increase longs above 15 700c/ share, as gains to 18 000c/share would be possible.
Go short: Breaching the support trendline of the primary bull trend would be a very bearish sign. A negative breakout would be confirmed below 9 000c/share
has been rated as one of the top five technical analysts in South Africa. She has been a technical analyst for 10 years, working for BJM, Noah Financial Innovation and for Standard Bank as part of the research team in the Treasury division of CIB.