Killer Trade: Steinhoff, Remgro
steinhoff International has been in a bear trend since confirming a double-top at 9 500c/share in October 2016. The share price has been struggling to recoup its losses, with potential to fall further.
The group has seen significant corporate activity in recent months, including the $3.8bn acquisition of Mattress Firm in the US, and the listing of Steinhoff Africa Retail (Star), a spin-off of its African retail chains, notably Ackermans and Pep. Steinhoff owns about 78% of Star.
Investor confidence has been dampened by legal action taken in the Netherlands by a former joint-venture partner, who has asked for an investigation into Steinhoff’s 2016 annual accounts. The court, which heard the matter late in September, is expected to make a ruling within the next two months. Steinhoff has denied any wrongdoing.
On the chart:
Steinhoff has breached the lower slope of a symmetrical triangle, which had been forming since December 2016. With the threeweek relative strength index (RSI) in bearish mode, a substantial recovery would only be seen once the RSI turns bullish.
How to trade it:
Go short: The group has confirmed a negative breakout of its triangular pattern below 6 375c/ share. It attempted to recover, but reversed below the lower slope of the pattern – potentially a throwback. However, continued downside below 6 375c/share, together with the three-week RSI remaining bearish, is a sign to sell – with possible downside to 5 050c/ share, or even 4 610c/share.
Go long: Steinhoff would have to trade above 7 750c/share to escape medium-term bearish territory and reclaim its losses towards 9 500c/share. A new bull phase would commence above 9 700c/share, and gains to 11 650c/share could ensue. ■