Still within its bull channel
Early in November, Discovery announced that it has raised R1.85bn in an accelerated bookbuild by issuing 10.9m new shares to qualifying investors, as part of its plans to launch its own bank. Discovery, which offers health, life and car insurance, was granted a South African banking licence last year. This was, however, on the condition that FirstRand Investment Holdings sell its
25% stake in Discovery Bank, and its 25.01% in their Discovery credit card joint venture business.
The funds raised by Discovery will therefore be used to buy out FirstRand.
How to trade it:
Discovery is trading in a long-term bull channel. It lost momentum after testing the upper slope and held at 13 800c/share. It then recovered and encountered resistance at 18 115c/share before falling back and holding slightly above 13 800c/share. Resistance breached at 18 115c/share could extend current upside to either the upper slope of the long-term channel, or the 21 000c/share level. However, further resistance encountered at 18 115c/share could see Discovery fall back towards 13 800c/share. Nevertheless, stay long above 13 800c/share and increase positions above 18 115c/share – as Discovery would remain within its bull channel. A negative breakout of the channel would only be confirmed below 12 360c/ share – thereby triggering a sell signal – with potential downside to 10 780c/share. ■ edito[email protected]week.co.za
Discovery head office in Sandton