Trading Ideas

Long Top5 oversold/overbought according to RSI & $JSETON



Long Top5 oversold/overbought according to RSI & $JSETON by SchalkLouw on TradingView.com

End of week 1Mar19. Nice little comeback from both Richemont and AECI – personally still like them both. FTSE/JSE Allshare ( JSE:J203 ) Top5 oversold/overbought according to 14day RSI indicator as follow:

JSE:DLT 12 
JSE:TON 21 
JSE:OMN 27 
JSE:MNK 27 
JSE:CSB 30

JSE:CFR 81 
JSE:CPI 78 
JSE:DTC 78 
JSE:AFE 77 
JSE:QLT 75

Spending a few minutes on one of the most oversold companies of the week (according to RSI ), namely JSE:TON :

Tongaat Hulett released a trading statement on 22 February 2018, both stating that “Gavin Hudson commenced his duties on 1 February 2019 as the new Chief Executive Officer of Tongaat Hulett with a mandate to expedite an immediate and comprehensive strategic and financial review with the view to stabilising the business, address the debt levels and set the path towards acceptable returns for shareholders” and giving a trading update.

The biggest shock was the fact that they were expecting a MASSIVE drop in both HEPS & EPS . SENS:

“Shareholders are advised that a reasonable degree of certainty exists that Tongaat Hulett’s headline earnings are expected to reflect a decrease of at least 250% compared to the R617 million earned in the twelve months ended 31 March 2018 (“the comparative period”). Consequently, headline earnings per share (“HEPS”) and earnings per share (“EPS”) are both expected to reflect a loss in excess of 803 cents and 927 cents respectively, and a reduction of at least 250% when compared to HEPS of 535 cents and EPS of 618 cents for the comparative period.”

Looking at the long-term graph, I personally think that anybody brave enough to buy now, might just be on a bit of a SUGAR RUSH. The long-term weekly graph, going back to 2003, show that not only are we back to levels last seen 16 years ago, but also that with any further weaknesses, R22.50 could technically still be very possible. We can clearly see that the break in October 2018 was a formal break of the long-term trend, which now puts us in uncharted territory. Both the 50-week and 200-week moving averages are still very aggressively pointing downward and I would caution investors in buying with the HOPE of a recovery. Always remember, that HOPE is not a strategy. This could just be a falling knife.

Wait for results (for year-end 31 March 2019), expected in May 2019, before making any big decisions

Schalk Louw
As Portfolio Manager at PSG Wealth Old Oak and with over 20 years’ experience in the investment industry, Schalk has consistently delivered solid returns to his clients and has certainly become one of South Africa’s most well-known strategists. He started his career in 1994 at the stockbroking company, Huysamer Stals (later ABN Amro). He joined SMK Securities in 1997, (later became BoE Personal Stockbrokers) and was later appointed as director and branch manager. In 2001 he co-founded Contego Asset Management and managed the company as CEO up to March 2014, after which he joined PSG Wealth Old Oak. Schalk has also become a regular household name with investors, with his reports being published in many of the national press. He completed his MBA in 2008.

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