RESI STILL LAGGING, INDI STRONG

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1 Welcome to TheMarket.co.za Weekly Analysis Report Date of Issue: 11 July 12 By Colin Abrams Contents: Intro and Exec Summary 3. Relative Strength 6. Overall Summary 1.Market Charts 4. Notes & Updates 7. Glossary (in first letter of each month) 2.Small-Cap Chart 5. Shortable Stocks/Indices Classic Trading Rule: Think like a guerrilla warrior. We wish to fight on the side of the market that is winning (and not to waste time by buying the lows). RESI STILL LAGGING, INDI STRONG Introduction: The tale of two markets continues on the JSE with resources stocks still under pressure, and unlikely to really get going until commodity prices start moving. They are of course becoming over more oversold, and their time will come again. Large-cap industrials remain firm, particularly the retailers, as well as selected financial stocks. This is where all market action should still be (apart from shorting the bounces on the resi stocks). We start with the Dow as usual, which is trying to work its way higher, but with difficulty. The strategy is to take profits after a few days rallying, when buying on pullbacks. The JSE All Share index is torn between the two major sectors of resi (going down) and findi (going up). As a result, trading the alsi future itself is very difficult right now. The index is in the middle of its multi-month sideways range again. We then show a chart of the JSE Indi 25 index that still looks good, despite being a bit overbought in the very short-term. We also take a look at the rand gold price that has drifted down in recent weeks, but its overall chart pattern is a bullish one. The stocks shown are Remgro (new upside breakout), Assore, (lining up a new buy signal), and Harmony (ready for another drop, to important support). The small-cap stock is Curro, a stock of much interest that has a higher target after a recent breakout. Overall, trading right now is difficult there s no question about it (and has been so for a while). The only strategy that s working for now it s to continue buying findi stocks on pullbacks (as we ve advised for quite some time), and not to try pick bottoms on the resi stocks. Their time will come again, and there will be ample opportunity to buy when it does come. One has to be where the high probability action is, which is not resources (unless you re shorting them). Executive Summary: Dow (chart 1): Buy on a clear reversal day up from current levels or lower (closer to line 3 ideally). All Share Inx (chart 2): Trade the boundaries near lines 3 and 2 on the index. Indi 25 Inx (chart 3): Hold med-term positions. Continue buying minor pullbacks. Gold (ZAR) (chart 4): Buy on a close above line 4. Keep holding current medium-term positions. Remgro (chart 5): Hold from recent breakout. Buy on a pullback to R136. if not in Assore (chart 6): Hold from recent breakout. Buy on a pullback to R136. if not in Harmony (chart 7): Sell short on either a bounce to line 2, or a close below line 1 first to. Curro (chart 8): Buy on a minor pullback to R14. or lower. Leading Stocks (3-mths): Top Growpnt, Truwths, Shoprit, Assore, Firstrand, MTN, InvPlc Resources - Anggold, Gfields, BHPBilliton, Harmony, Sasol Shortable stocks/indices: 21 stocks, 0 indexes, 1 commodity, 4 currencies. THIS NEWSLETTER IS TO BE READ ONLY BY THE SUBSCRIBER. COPYING, ELECTRONIC TRANSMISSION ( ), REPRODUCING, AND/OR DISSEMINATING THIS DOCUMENT, OR PART THEREOF, IN ANY OTHER MANNER WITHOUT THE WRITTEN CONSENT OF THEMARKET.CO. ZA IS A VIOLATION OF THE COPYRIGHT LAW - AND IS ILLEGAL.

2 1. MARKET CHARTS DOW JONES Zigzagging, with a higher bias Broad Recommendation: BUYING BIAS (WITH CAUTION) Trend: Short-term up, despite pullback. Med-term technically down. Lon-term sideways to up. Strategy: Buy on a clear reversal day up from current levels or lower (closer to line 3 ideally). Chart 1. (Daily) 0 Stochastic Oscillator ( ) OVERBOUGHT February 0-DAY MOVING AVE March I-DJ-INDU (12,733.87, 12,8.29, 12,6.91, 12,653.12, ) April May 2 S H June OVERSOLD TARGET July Chart Setup: The Dow has drifted down in recent days and hasn t yet given a reversal day/candle (see Glossary) up to buy on as advised last week. In the immediate short-term it has reached some Fibonacci support, but the main support level here is a zone formed by lines 3, and it s rising 0-day moving ave. The short-term Stochastic Oscillator (on top) can still drop further before becoming oversold in the short-term. Strategy Details: Only buy if there s a clear reversal day/candle up from current levels or lower (ideally closer to lines 3 at ). No large positions advised, because the indices are proving difficult to trade at the moment. Target: There is still an upside target to 13 2 based on an inverse head and shoulders (labelled S-H- S). But if the index breaks down below the support some of lines 3, then this (bullish) pattern will fail. Right now it can still drop to the lines 3 support zone at S Stop-loss: If it gives a clear reversal up to buy on, then place your stop either below the low of the reversal day up, or as a closing price below 12 0, if preferred. Lock in half profits at ii

3 JSE ALL SHARE INDEX Torn between two broad sectors Broad Recommendation: TRADE ONLY AT/NEAR THE BOUNDARIES Trend: Short-term sideways. Med-term sideways. Long-term up. Strategy: Trading the boundaries near lines 3 and 2 on the index, is the safest strategy right now. Chart 2. (Daily) 0 Stochastic Oscillator ( ) OVERBOUGHT OVERSOLD JSE-OVER (339.3, 341.4, 338.3, 339.9, ) TO FEB February March April May June July Chart Setup: The index is pulling back after rallying sharply from end-june. This puts it right back in the middle of its large broadening formation (lines 1 and 2). We recommended a long position two weeks ago, which led to some rallying. But I m not convinced the index is going to go straight to line 2 without further pullback. The fact is, being in the middle of this sideways range, makes it difficult to trade, unless one enters near the extreme boundaries. The short-term Stochastic Oscillator (on top) is overbought, so more pulling back over the coming days is very possible. Strategy Details: With resources and findi stocks moving in opposite directions, makes trading the alsi itself tricky right now. So, if trading the alsi future, I would exit the current long trade (at about breakeven), then go long if the price happens to drop to near line 3 (33 000). Or conversely, go short if there's a reversal down from line 2 ( ). This way one can quantify the risk very clearly. If using this index as a general indication of JSE stocks, it s better to look at the resi and the findi indices separately, because of these two broad sectors moving in opposite directions. Target: Being that it s in the middle of its range, it can go either way. My feeling is it will probably drift a bit lower before going back up again to test line 2 (34 9). To the downside, support is line 4 (33 0), then Lines 3 provide the final support zone. Stop-loss: If buying a reversal up from (upper line 3), the stop is a close below If shorting near line 2, the stop is a close above iii

4 JSE INDI 25 INDEX Uptrend well intact Broad Recommendation: HOLD/BUY PULLBACKS Trend: Up on all main timeframes. Short-term overbought. Strategy: Hold med-term positions. Buy minor pullbacks as long as the index remains above line 1. Chart 4. (Daily) 0 Stochastic Oscillator ( ) OVERBOUGHT 0 OVERSOLD 3 JSE-IND25 (3.4, 332.9, 329.8, 331.0, +1.0) 'FAILED' H S S DAY MOVING AVE February March April May June July Chart Setup: The industrial 25 index is the leading major sector on the JSE (as it has been for a longterm although intermittently exceeded by the financial 15 index). The index has given a failed head and shoulders pattern (as labelled). This is the most bullish pattern in the book, and probably my favourite pattern to trade. Right now it s moving in a rising channel (lines 1 and 2). The only potential short-term concern is that the Stochastic (on top) is overbought. But, given that a new uptrend is underway here (after moving sideways for three months Mar-May) it can remain overbought for an extended period (as seen in February). Strategy Details: Industrials are still the place to be (together with selected financials). Keep holding med-term positions on large-cap industrial stocks. Minor pullbacks (e.g. 2-3 day pullbacks) are still buyable ideally if you can get them on a pullback closer to line 1 on this index. Moreover, pullbacks remain buyable as long as the index remains above line 1. (Line 1 is at 32 4 on Weds 11 th and its rising at an angle of pts per day thereafter). The current level of this index is (Note, the SatrixInd is one way of playing the index directly). Target: The minimum target I have is 33 0, but it can comfortably exceed that target over the coming months. Short-term traders to take profits as it gets to/near line 2, and then re-enter on pullback thereafter (as an ongoing strategy). Stop-loss: A close below line 1 as a general indicator for large-cap industrials. Short-term traders tighten stops (on large-cap index stocks) as this index nears line 2 iv

5 GOLD PRICE (IN RANDS) Consolidation pattern Broad Recommendation: MED-TERM HOLD/TRADERS PREPARE TO BUY Trend: Short-term down, but oversold. Med-term sideways. Long-term up. Strategy: Buy on a close above line 4. Keep holding current medium-term positions. Chart 4. (Daily) OVERBOUGHT OVERSOLD September Oct ober Nov ember December 12 Stochastic Oscillator ( ) M-GOLDZAR (13,073.87, 13,073.87, 13,073.87, ) February March April May June July Stop-loss: Med-term stop is a close below line 5 (12 485). For buying on a close above line 4, the stop will be a close below line 3 (12 9). v 1 2 POS DIVERGENCE MED-TERM TARGET Chart Setup: After breaking out of a large falling wedge (lines 1 and 2), the rand gold price has been consolidating sideways in a smaller falling wedge (lines 3 and 4). Falling wedges do typically break out to the upside. The short-term Stochastic (on top) is giving a positive divergence (see Glossary) from is oversold region, which is an early warning of a rally to come. Strategy Details: The med-term long position advised here (from the breakout in May) is still a hold. This is our preferred strategy, as mentioned for some time at our weekly rand gold price update (in this letter). Short-term traders should wait for a close above line 4 to go long (buy). Line 4 is at 13 2 on Weds 11 th, and its declining at an angle of R per day thereafter i.e. to 13 0, 13 1 etc). To the downside, if the price closes below line 3 (12 9), it will then most likely continue lower in the short-term. Target: There is still a med-term upside target of 14 3 based on the height of the large wedge projected up. A breakout above line 4 will take it to 13 8 initially, where short-term players should take profits. Med-term, lock in partial profits then. But a close below line 3 (12 9) will set up a drop to line 5 support at (I do think shorting it will be risky)

6 REMGRO (REM) Bullish breakout Broad Recommendation: HOLD/BUY ON A PULLBACK Trend: Up on all main timeframes. Strategy: Hold from recent breakout. Buy on a pullback to R136. if not in. Chart 5. (Daily) 0 Stochastic Oscillator (98.06) OVERBOUGHT OVERSOLD TO AUG ' Nov ember December REMGRO (139.0, 139.7, 138.6, 139.0, ) February March April May 2 3 BREAKOUT TARGET June July Chart Setup: Remgro has finally broken out of a four-month sideways ascending triangle (lines 2 and 3). It has a higher target in place. In the immediate short-term however, it is overbought, as seen by the short-term Stochastic (on top). Strategy Details: Hold if you bought on the break, as advised here in recent weeks. If you haven t yet bought, wait for a pullback to R136. to buy (because it is overbought right now). Target: Minimum upside target is R146., based on the height of the triangle projected up. From R145, take partial profits and use a breaking of its prior two day low as the trailing stop. Stop-loss: Initial stop is a close below R133.. vi

7 ASSORE (ASR) Oversold Broad Recommendation: TRADERS BUY FOR ANOTHER RALLY Trend: Short-term sideways. Med and long-term up. Strategy: C Chart 6. (Daily) Stochastic Oscillator ( ) OVERSOLD OVERBOUGHT 325 ASSORE ( , , 288.5, , ) DAY MA February March April May June July Chart Setup: Assore has pulled back over the past month and has now reached (and bounced off) an area of support formed by lines 1 and 2, and it s rising -day moving ave. I addition, the short-term Stochastic (on top) is oversold (bullish). Strategy Details: Buy it on a close above R295, or on a pullback to line 1 (R285 level) (on a reversal day up from there), for another short-term rally. Target: Look for a retest of the June high of R Take half profits there, and continue with breaking of its prior two-day low as the stop from there. Further potential is to R324. Stop-loss: Initial stop is a close below w R281 (line 2). vii

8 HARMONY (HAR) Still vulnerable Broad Recommendation: TRADERS SELL SHORT Trend: Short-term down. Med and long-term sideways. Strategy: Sell short on either a bounce to line 2, or a close below line 1 whichever happens first. Chart 7. (Daily) 0 95 Stochastic Oscillator (36.19) HARMONY (75., 76.80, 75.00, 75.80, ) OVERBOUGHT OVERSOLD DAY MA April May June July BREAKDOWN TARGET Chart Setup: Harming has been falling since early-june and looks set to retest its May lows soon. Over the past week it has formed a flag pattern (lines 1 and 2), which in a downtrend is a pause before another leg down. The short-term Stochastic is relatively oversold, but one more dip into its oversold region is very possible. Strategy Details: Short-term traders sell it short on either a bounce closer to line 2 (R78.), or on a close below line 1. (Line 1 is at R74. on Weds 11 th and its rising at an angle of 5c per day thereafter). Do whichever happens first. Shorting on the bounce is slightly more risky but gives a better risk/reward ratio (see Glossary), and is preferable in this particular case. Target: Once it closes below line 1. Look for a drop top R.. Take partial profits at R71. to reduce your overall risk. And from there, use a breaking of its prior one day high as the stop. Stop-loss: If shorting on the bounce, place your stop as a close above R79. If shorting on a close below line 1, the stop will be a close above R76.. viii

9 2. SMALL-CAP. CHART CURRO (COH) Higher target; a buyable pullback Broad Recommendation: BUY ON A PULLBACK Trend: Up. Strategy: Buy on a minor pullback to R14. or lower. Chart 8. (Daily) Stochastic Oscillator ( ) CURRO (15., , 14., , -0.0) OVERBOUGHT OVERSOLD MINIMUM TARGET DAY MA ber Oct ober Nov ember December February March April May June July Sector: Specialised Consumer Services Price: R15.00 Chart Setup: Curro has broken out of a large channel (lines 1 and 2). It has a higher target in place. But because it s moved quite a bit since the breakout last week, its best to wait for a pullback before buying. Yesterday it did start a pullback. The short-term Stochastic (on top) is giving a negative divergence from its overbought level, so there's a chance of more pullback before it reaches the target. Strategy Details: Buy on a pullback to R14. or lower, BUT only if it pulls back to/near there before reaching its target. Target: Minimum upside target is R18. i.e. the height of the channel projected up. It can pull back to retest its breakout point at line 2 (R13.) before continuing up to the target. That will be the ideal scenario. Long-term I do think this is a R share, but need more confirmation regarding that right now. Stop-loss: Initial stop is a close below R12. Once it gets near the R18. target, use a breaking of its prior two-day low as the stop, and take at least half (if not all) profits at the target. ix

10 Other small-caps of interest (alphabetically): (shares to consider on a pullback) - Long: Hosp-A, Pan-Af, Zeder. 3. RELATIVE STRENGTH These are the strongest index stocks on a 3-month basis relative to the JSE All Share Index. Typically the leading stocks keep leading. Therefore, traders can buy these stocks on pullbacks, although always look at the chart first before making a decision. Medium and longer-term players should look to buy them when they first appear on this list. We've also included the weakest index stocks. These can either be shorted on bounces (if in a downtrend), or traded as a "pairs trade" against the strongest stocks i.e. go long a strong stock, and sell short a weak stock at the same time. Strongest seven Top stocks: Growpnt, Truwths, Shoprit, Assore, Firstrand, MTN, InvPlc. Weakest seven Top stocks: Lonmin, Amplats, Implats, Exxaro, Absa, Steinhof, Richemont. Strongest five Resi stocks: Anggold, Gfields, BHPBilliton, Harmony, Sasol. Resi vs. Findi over 3-months: Findi stronger. 4. NOTES & UPDATES: - Concerning last newsletter s index stock charts: - Bidvest: keep holding, it s gone sideways over the past week since its breakout. Stop for traders is a close below Med-term stop is a close below Target Aspen: it s had a good run and so far stopped a few cents short of the first target of (it's always worth locking in some profits if it gets close, as I often say). Keep holding for now. Stop is a close below 124. for traders. Take at least half profits in the range. Potential to still med-term. - Vodacom: has a had a nice run so far on this trade. Take profits at 0, 1. and 3. in increments. Raise stop to a close below 94.. Other recommendations and index stocks of interest (alphabetical order): Important Notice: When buying after a pullback or selling short after a bounce, always look for a sign of a reversal e.g. reversal day or reversal candle before entering (otherwise one is simply picking a top/bottom, which does not work). A reversal day/candle at the top is typically when the price rallies that day but then sells off to close near the bottom of the day s range. Conversely, a reversal day/candle at the bottom is when the price initially drops that day, but then rallies back to close near the top of the day s range. Waiting for the reversal day will put the odds back in your favour. (I usually like to see the high/low of the reversal day taken out the next day before finally entering i.e. the entry trigger ). - Regarding taking profits, I suggest locking in profits in thirds as the price moves in your favour i.e. 1/3 of your position, then another third then the final third. High probability trades (or charts), other than Charts 5, 6, and 7, that I particularly like (long or short) at the moment (in no particular order. See comments below): x

11 - MTN, Naspers, Woolies, RMBH. - Abil: it s pulled back and our stop is a close below 35. which might get triggered. If it does, this stock can still drop to Absa: it has a target of 133. but it s very oversold. I wouldn t be buying it just yet. - Amplats: it s very oversold, while the strategy is to short on bounces, given that its so oversold, shorting is risky now. The first sign of strength here will be a close above 4, but no buying advised then either, until is shows further signs of a bottom. - Anggold: it triggered the mentioned short signal from last week and reached the target this morning. It can still drop to 258. There is a lot of support at the May lows at If it does get near there it might be worth taking a long position with a tight stop, but we ll update as events unfold. To the upside it needs to close above 276 to show some first signs of strength. - Anglo: didn t close above 275 to trigger a buy signal. Its drifted back down and remains in a med-term downtrend. The early June low is It can be retested. If it gives a 2-3 day bounce and then a reversal day down, short it drop a drop to 255. Stop above the reversal days high. It needs to close above 275. to give a buy signal. Med-term I do think its low risk, ideally near that 254 level. - ARM: is retesting its support zone at It remains in a med-term downtrend. Bounces are to be shorted, but with caution, e.g. a bounce to 171 and reversal day down from there. Stop a close above 172, target to 163. No large positions advised because it s a very volatile stock. - Aspen: see update above. - Assore: see Chart 6. - Barworld: it triggered the mentioned buy signal, but has not had follow through as yet. Caution was advised because the trend is still down. Place your stop now as a close below short-term support at 78.. Exit if it bounces to 84.. It needs to close above 85 then to trigger a new buy signal. - BATS: its continued drifting up slowly but surely, proving its defensive qualities. Target is 442. It is overbought in the short-term and one should still wait for a pullback in my view, to re-term e.g. a pullback to 4. - BHPBilliton: got very close to the 244 target where we advised to tighten stops for traders. It has drifted back down from there and has some minor support at 231. If still in (traders), place your stop as a close below 228. Exit if it bounces to 238. The best strategy here is to wait for a breakout and close above 243. to buy, which should then officially end its downtrend. Resi stocks are very oversold on the large time frames and a rally in commodities is needed to get them going again. - Bidvest: see update above. - Clicks: med-term target to 64.. Buy on a pullback to 52 for that. Stop a close below Discovery: it continued up to the 54. target on Monday before pulling back quite sharply. The trend remains solidly up here. Look to buy again on a reversal up from the 52. level for traders. Med-term it remains a hold though. Stop for traders then will be a close below 52. Target back to Exxaro: last weeks advice to exit the long trade was very timely as the stock fell like a stone on a recent negative news announcement about coal. It has support at 178. But if it breaks down and closes below there will be a further negative for it. It is very oversold in the short-term but no buying advised nor shorting a rally just yet. It's best to give it some time to see how its price settles, before looking at a new trade here. - Firstrand: it did reach the buying level mend last week. It's so far moved sideways over the past week, but as mentioned last week, a potential concern here is a head and shoulders forming on the daily chart (as with stalemate RMH). Hold for now if you did buy. Stop is a close blew 26. for short-term traders. It needs to close above 27. to get going. If not in, wait for that xi

12 close to buy on. Target then will be 29.. If it does close below 26. it will setup a potential drop to 24.. I do still think the med-term will remain up for the time being, even if it does break the 26. level. - Gfields: it can still make its way down to 97/96. and retest the may lows there. It is oversold at the moment but can still be shorted (e.g. if HAR Chart 7) triggers its short. Stop a close above 3.. Take profits at Harmony: see Chart 7. - Imperial: the mentioned trailing stop locked in remaining profits on this trade. It is overbought in the short-term still so caution advised, but the strategy is still to look for a reversal day/candle up from 177 or lower to re-enter. No large positions advised then. Stop will be a close below 174. then. Target then Implats: it s very oversold, but the strategy, if any, is to be shorting it on bounces. Right now wait for a bounce to 136 at least to short on (on a reversal day down). Caution will be advised because its oversold. Downside potential still to InvPlc: it very overbought at the moment, and still needs to give 2 consecutive closes above to trigger a med-term buy signal. Right now look for a pullback to the 47. level to buy again. Target then back to. Stop will be a close below the reversal days low. - Kumba-IO: it triggered the mentioned buy signal, but frankly this stock is too volatile at the moment to trade. It looks like it might be forming a triangle pattern which explains its volatility in both directions at the moment, either way, exit this long if it gets closer to 5 again. Ii will need to close above 575 to trigger another buy signal. Place your stop for the current trade as a close below the recent low of Lonmin: its triggered the mentioned short signal and now getting near the downside target which is 86.. Start taking partial profits on this short trade, and the rest at/nearer the target. - Massmart: is been basically moving sideways in recent weeks but still building up for a rally to 189 in my opinion. Take partial profits at It has triggered the mentioned buy signal. I m viewing this more as a med-term trade. Stop is a close below 166. If it drops back closer to 167 in the interim it can still be bought. - MrPrice: keep holding (as always). Next target is 129. Pullbacks remain buyable for shortterm traders. - MTN-Group: has retested its 146. critical resistance level again. It is overbought in the short-term so a pullback to 143. is very likely. I m getting the feeling that this stock is building up for a breakout. It's been moving sideways since early 11 in a large channel. A weekly close above 147 will be the buy signal for the med-term, for a move to 198. In the meantime its too overbought right now to buy. - Naspers-N: is in a med-term sideways channel between 434 and Trade these boundaries for now (buy at support/short at resistance). More aggressive traders were advised to buy last week, but no large positions to be done. A close above 4 will be another buy signal (Albeit it still aggressive). Target to 4. It needs to breakout and close above 477. to really get going again. But a close below 343 will be negative and short signal for a drop to 5. - Nedbank: it finally reached the 181 med-term target yesterday, this is a target given in December last year. Its overbought in the short-term but minor pullbacks are still buyable, but with caution. A pullback and reversal up from 174 level will be buy signal for a rally to Stop for traders then a close below the reversal day up s low. - Netcare: pullbacks are buying on an ongoing basis for the med-term. Med-term target is Newgold: is moved sideways over the past week but still vulnerable in the short-term (refer to Chart 4 of the rand gold price). Stop is a close below 126 for traders. It needs to close above 1. to trigger another buy signal. Main support here med-term is Old Mutual: its moved sideways over the past week. Yesterday it narrowly triggered the mentioned buy signal. Today is dropped back again. Keep holding with your stop a close below xii

13 If that stop is triggered it could drop back to 18. To the upside if it gets back to. then take trading profits. - Remgro: see Chart 5. - Richemont: continues to drift lower. It s in a falling wedge pattern, which typically does break out to the upside, but it needs to close above to trigger that. That will setup a move to. But for now I m looking for a bounce back to 45. If it gives a reversal day down from there then short it, but with caution because its weekly chart is very oversold. It has support a 41. which it can still drop to if it doesn t give that breakout buy signal. - RMBH: has drifted sideways to down over the past week, with no revels day up to buy on. It's forming a potential head and shoulders (like FSR). The best strategy is to wait for a close above to trigger a new buying signal. That will lead to a rally to 37.. Stoop a close below 34.. If it closes below 34 it will setup a drop to 32.35, but the med-term will still be up. Bottom line, wait for the next breakout direction. - SABMiller: it gave the breakout of the critical 331/332 resistance level mentioned last week. The weekly close through was right up at 339. so no buying to be done when it s that for away from the entry level. Med-term is 355 nevertheless. Look for a bit more pullback to buy on i.e (on a reversal day up as always). Stop will be a close below 325. Lock in partial profits at Sanlam: got very close to the 37. target before pulling back. Hold. Short-term stop is a close below 36. Take trading profits at/near 37.. It remains a solid performer with pullbacks buyable, but with more caution now because it had such a large run in recent months. - Sasol: large-cap resources stocks remain a shorting the bounces game. A close below 3 will be a short signal for a drop to 3 but with caution and no large positions because these stocks are volatile right now. Stop will be either a close above 347 or a breaking of its prior 2 day high, whichever triggers first. - Shoprit: reached and exceeded our upside target for half profit taking and the remaining profits locked in on the mentioned trailing stop. Indeed, retail stocks are one of the few bright spots on the market. It is overbought so wait for a pullback closer to 154 to buy again (traders). Medterm hold regardless. Stop then will be a close below 152 for traders. Target to 1. - Stanbank: gave the mentioned pullback to re-enter on as advised. Stop is a close below 9. and its not out the woods yet. It needs to close above 115 to take it up to to take profits. - Steinhof: got to our shorting level. Take profits at 24. and more at 24. Stop a close above There is support at Tigbrands: this is a stock I m watching closely for another good leg to the upside. It looks to me to be forming a med-enter bottom. It did trigger the mentioned buy signal from last week. It needs to close above now, which has become a resistance level, to get going. So if not in wait for that to buy on. If you bought on last week s signal its slightly up and my suggestion is to exit this trade for a small profit, and then wait to see if it closes above to re-enter. That will setup a med-term rally to 294. Right now its technically a sell short on a close below 255 but with great caution, for a drop to 247. Stop a close above 261 no large position advised on that. My preference is to wait for the new upside breakout to buy on. - Vodacom: see update above. - Woolies: reached the first target mentioned last week for partial profit taking. Next target is 55. It's a bit overbought in the short-term. It remains a med-term hold regardless. Traders buy back the portion you took profits on, on a reversal day/candle up from 51. if it pulls back to there. Stop is a close below.. Take more profits at 53.. xiii

14 GOLD UPDATE: The JSE gold index remains vulnerable in the short-term and is pointing to a drop to 21, with a retest of its may lows of 2156 very likely. From there we may well get another opportunity to go long (buy), depending on price action there i.e. some clear upside reversals, including a weekly reversal up. Right now gold stocks are shortable for a more short-term downside. Refer to individual stocks commentary above. Dollar gold price: its chart was shown here in two newsletters back and it didn t give the upside breakout and close above $16 to buy on. As a result, it s slipped back and has support at $ It can retest that level because it s still relatively overbought in the short-term. A close above $1615 (that doesn t close near the low of that day) will be the buy signal here. That will setup and initial target of It's worth waiting for that an not pre-empting any breakouts here. The long-term bull market is still intact despite any further dropping that might occur (it would have to really drop a lot to break the bull market). Rand gold price: see Chart 4 for detailed commentary. 5. SHORTABLE STOCKS AND INDICES Please note: We list the stocks and indices (local and overseas) that are in short-term (at least) downtrends, and that can be sold short (see Glossary for definition) on rallies to resistance. Selling short can be done via single stock futures, CFDs, spread trading, and/or put warrants. One way of trading these stocks/indices is to sell short rallies to the falling -day moving average (in stronger downtrends) or the falling -day moving average (in more gradual downtrends). These moving averages tend to act as resistance. Wait for a downward reversal at the moving averages before selling short. NOTE 1: ALWAYS USE PROTECTIVE STOPS ON ALL POSITIONS. Selling short is for shortterm traders only, and all positions must be monitored closely. NOTE 2: The instruments on this list are not automatic shorts, but it is a starting point for looking. Always look at the chart first before making a final decision. Shortable Stocks: (as of 11 July 12) Price (R) -Day MA: -Day MA: ABSA AFROX ALTECH AMPLATS ANGGOLD ARM ASTRAL AVENG CAPITEC GFIELDS GRINDROD HARMONY IMPLATS LEWIS LONMIN NEWGOLD NORTHAM PPC xiv

15 SASOL STANBANK STEINHOF TELKOM Currencies/Commodities: Price -Day MA: -Day MA: M-SILVER$ C-EUR-$ C-EUR-ZAR C-GBP-$ C-GBP-ZAR OVERALL SUMMARY As we ve seen in recent weeks (and months frankly), trading is not always plain sailing. We re in a very unusual and rare situation of the All Share index moving in a broad sideways range since February (the longest sideways range in over years). With the market not in a clear trend (up or down) trading because far more challenging. Of course, we know that every sideways range (since the beginning of time), is always followed by a large trend. This one will also be. I still believe that trend will be to the upside, but as always, we need to wait for final confirmation (which in this case will be a breakout on the All Share index above 34 9). Nevertheless, despite all of the above, there are quite a lot of index stocks that are in beautiful uptrends. These are mainly retail stocks, as well as selected large-cap financial stocks. A trend is a trend and it doesn't matter what the stock is. So, this is where one s buying should be (and have been) taking place. There have been good profits to be made on many large-cap findi stocks, although the going is somewhat slower than usual right now given the overall markets sideways action. But, the underlying principle remains the same: only look for high probability situations and ignore everything else. Don't try pick tops and bottoms (that s a loser s game, and will always be so). Overall, keep positions smaller than usual even in the high probability situations given the tremendous newsdriven market we re in and the uncertainty overseas. But, if you remain extra picky about what you trade, and be patient, there s no reason not to make money in this market. Sincerely, Colin Abrams TheMarket.co.za PS: Remember: Protective stops on all positions! NEXT WEEKS NEWSLETTER: Please note, I ll be going on holiday next week and as a result the will not be a newsletter next week. Subscribers will be given an extra seven days free on their subscriptions as a result, to compensate for this. My apologies for the inconvenience (but I do need to take the occasional break myself). xv

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