Killer Trade: Stein­hoff, Rem­gro

Finweek English Edition - - Marketplace / House View - By Mox­ima Gama

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. ■

SOURCE: Me­taS­tock Pro (Reuters)

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