Technical analysis: Sappi presents two targets

AFTER moving sideways for the past 10 months, paper producer Sappi has broken out of two chart patterns with higher targets, making it attractive. Sappi – Bullish breakout. Recommendation: Buy. Trend: Up on all main time frames. (Daily) Sappi has broken out of a large symmetrical triangle (lines 1 and 2) by breaking out above line 2. It has also broken out of a smaller ascending triangle (lines 3 and 4). As a result, there are two higher targets now.

Its short-term stochastic (on top) is getting to its overbought zone, so a minor pullback is possible. But I give the chart patterns preference.

Buy at current levels for ongoing upside. Moreover, pullbacks will remain buyable on an ongoing basis until the higher target is reached.

The first target (T) is R80.90, based on the height of triangle 3 to 4 projected up. (Short-term traders can take profits there, and re-enter on a pullback thereafter). The higher target (T2) is at R90, based on the large triangle projected up. This is a medium-term target.

Initial stop is a close below R73.40 (line 4). And from R80.60, short-term traders only, raise the stop to a breaking of its prior one-day low. Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author, or attend his courses, please go to www.themarket.co.za