JSE remains buoyant and poised for a rally

JSE remains buoyant and poised for a rally

The JSE has remained buoyant after falling due to the ANC’s EWC announcement last week. It’s been range bound since breaking above its previous consolidation phase. A rally into year end, is still on the cards due to several JSE heavy weights earning significant offshore revenue. Stronger global growth and a Rand that is facing headwinds into next year’s elections should see earnings increase after a period of consolidation and contraction. Rand hedges like GLN, APN, MEI, MTN and NPN are all poised for a rally. 

 

Global Market Summary 

  • Apple hits US$1 Trillion market cap. 
  • US Unemployment drops to 3.9%. 
  • Fed improved its view of the economy to Strong from Solid – Expect an interest rate increase in September. 
  • BOE increased rates by 0.25% as expected. 
  • Japan will adjust stimulus to be more flexible as growth gains momentum. 
  • Nasdaq and S&P bag fourth straight monthly gain and S&P is just 13 trading days away from longest bull market in history. 

The week ahead: 

  • Local Data: Gross and Net Reserves, Manufacturing: Production and sales (07/08); SACCI Business Confidence (08/08); Capital expenditure by the public sector (09/08) 
  • Results Due: NED, NBKP (07/08); GLN, MPT, MTN, QLT, SOH (08/08); ABSP, FFA, RNG (10/08) 
  • EX-Div (07/08): AMS, HDC 

Last week’s movers and shakers… 

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Best Performers:  TSX 18.2%, SGL 17.5%, TOR 9.7%, HLM 8.7%, ASR 6.9%  

Worst Performers: ADI -16%, SFN -7.6%, IPL -4.2%, CML -4.4%, BAT -4.2% 

 

Other Economic data releases of interest… 

  • Tuesday: Interest Rate Statement (AUS) 
  • Wednesday: Inflation Expectations (NZL); RBA Gov Lowe Speaks (AUS); Crude Oil Inventories (USA) 
  • Thursday: Interest Rate Statement (NZL); PPI (USA) 
  • Friday: CPI (USA); Unemployment Rate (CAN); GDP, Manufacturing Production, Prelim GDP (UK); RBA Monetary Policy Statement (AUS) 

 

One to Buy – Long MTN ahead of its Results 

 

MTN is due to release its results tomorrow. The company hasn’t provided any guidance’s, but we should see continued improvement with management achieving its target of consistent single digit growth. Investors will be looking for more information on the Cyprus sale and delayed Iranian Fibre Capex. 

 

MTN is typically volatile when results or trading statements are released, and we will try take advantage of that. 

 

Long MTN at R111.00 for a move to R121.00 but will be looking to take profit above R115.50 if the spike doesn’t hold. Stop loss will be a daily close below R104.00. 

 

One to Sell – Short AMS after a 13.88% rally in 10 days 

 

AMS has rallied strongly over the past 10 trading days pushing it to a standard deviation of 2.7. The rally has hit some selling pressure and the share price is about to pull back.  

 

AMS goes EX-Div for R3.74 today, and naturally the price should fall but I expect the public holiday to catch a few traders bidding up the price thinking its still trading cum-dividend.  

 

Short AMS at R410.00 for a move to R375.00 in the coming weeks. Place a stop loss at R420.00 

 

Long Term Ideas 

  • Discovery: Up 10.13%. Strong support above 200-day moving average. Hold 
  • Coronation: Buy below R60.00 for a move back to R80 
  • ARM: Up 6.59%. Buy dips below R110.00. 
  • Dischem: Buy below R28.00. Target R33.00 
  • Shoprite: Building an uptrend from the R200 long-term support level. Hold. 
  • Aspen: Accumulate on weakness below R245. 
  • Sygnia: Support building above R10.00. Add 
  • Santova: Up over 28%. Move stop loss up R3.40. to lock in gains. Hold 
  • Merafe: Accumulate below R1.55. Big Dividend LDT 28 August 
  • Jubilee: Speculative buy below R0.50.  
  • MTN: Accumulate for long term below R110.00. Results due Wednesday 08/08. 
  • Glencore: Still bullish. Hold 
  • Wescoal: Long term buy. Add below R1.80 
  • Naspers: Building Support above R3,200 (200 day moving average), Hold 

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