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Potential Long on the South Africa 40 next week?

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SA40 has pulled back and formed a bullish weekly candle.

Zooming into the Daily timeframe, I can see a strong bullish candle, followed by an inside bar consolidation.

I am thinking of entering this market on the break of the high of the daily/inside bar/weekly high on Monday.

 

sa_weekly.PNGsa_daily.PNGsa_hourly.PNG

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I expect if you're looked at the SA40, you are aware of the back drop of recent events. For the benefit of those who may not follow South Africa closely, here are some thoughts on recent events and the key (to my mind) forthcoming risk event:

 

1. In the short term, the furniture manufacturer Steinhoff recently lost over half its value due to an accounting scandal. As the second largest furniture manufacturer in the world after Ikea and one of South Africa's largest market cap companies, its performance will have impacted the SA40 index materially. At this point downside is priced in, so more an upside risk if the investigation concludes that losses/mis-statements are smaller than feared.

 

2. The ANC ruling party have just elected a new leader. This means that although Zuma remains president of South Africa, he now has diluted control over the ANC party, and this could lead to a more business and investor friendly attitude from the ANC party and the South African government in time. There is also a hope that a crack down on corruption and under-performance in various government bodies comes in time.

 

3. Looking ahead, I believe the next budget speech is in February. This could significantly impact SA40 and the exchange rate depending on the degree to which is targets economic (growth/debt) issues versus social/political issues.

 

Ian

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 & ,  This is good stuff you guys, the technicals show an uptrend with a pullback and a nice rounded bottom on the 4 hour chart which is now testing the breakout level. But wait for a breakout of  52261 or a break through and retest of 52261.

If it does breakout the risk is limited (stop loss just below 52261) but the target is big at the prior high at 55245. 

 

As   points out there are fundamental risks ahead which could scupper the party but always shoot first and ask questions latter, with a well defined tight stop and big target get in, you can always bail out if the tide turns.

 

South Africa 40_20171222_23.07.png 

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