Similar to the MTN
analysis (but on the opposite side), i want to use this as a good example of a bearish
technical structure. It is clearly evident on the Discovery chart that every attempt to rally is met with a lower swing high & the counter is also able to post new swing lows on the downturns. I have only showed the 50 and 200 day moving averages for clarity purposes, but if you had to bring up all the major moving averages, one can also clearly see that the moving averages are pointing down with the short term averages crossing below the longer term averages. In my opinion this is the type of chart structure where you would be looking to adopt an approach of shorting the rallies, rather than trying to pick the bottoms for a bounce. The balance of probabilities would favor downside in this share. Looking at the fundamentals, two things that concern me (1) the launch of the banking business is proving to be very capital intensive indeed which should depress earnings
at least for the next little while.. (2) we have seen directors take out protective collar and hedging strategies to protect their share options (not something that exactly instills confidence in the stock). Two levels to monitor for shorting on the rallies are R150 which is the previous peak, and R155 which coincides with a previous peak as well as the declining 200 day moving average. Also watch the current level of R142.60 which is proving tough resistance at the 50day moving average. If one zooms out a bit on the chart and looks at a longer weekly view, it would not surprise me if over time we were to retest the massive horizontal support level
at R110.00 which would also coincide with the bottom of the fibonacci channel.