On the back of comments from the US Federal Reserve Chair Jerome Powell stating that the further interest rate hikes are on the cards as the result of the strong US economy, US markets have continued to tick lower.
The S&P 500 is down from 2780 on Tuesday 27-February, having found resistance at the 61.8% Fibonacci retracement level.
Looking at the daily chart, we shave seen a rising wedge pattern emerge, where the price has given a bearish break out of the wedge. My previous experience with this pattern informs me that the breakdown is often accompanied by a re-test (bullish leg).
I am looking at an opportunity for traders use this dip to take a short term buy/long position on the S&P 500 index.
Chart: S&P 500 Cash Index
Buy at current levels 2663/65
Take Profit: 2760/2780
Once a darling among South African investors, Enterprise Outsource Holdings also known as EOH has seen it’s share price and to a certain extent – it’s reputation – take a knock over the last 18 months as investors became concerned over it’s growth prospects as well as market speculation that the company had been able to obtain certain government contracts via a so-called “middle-man”.
On 15 May 2017 it was then announced that long time CEO Asher Bohbot had stepped down with immediate effect, further raising concerns among investors about the company’s prospects as well as whether the company would be able to sustain the rate of growth that it had achieved since coming to market.
Exacerbating pressure on the share price was forced selling by directors in December 2017. In a Stock Exchange News Service (SENS) announcement the company stated that the high volumes of shares traded and the price drop were caused by “the forced sale of shares by financial institutions against equity financed transactions to various individual shareholders, including two EOH directors. Over four days, between Tuesday 5 December and Friday 8 December some 2.5 million EOH shares were sold by Tactical Software Systems (TSS) for a total of R127m.
On 8-Dec-2017 the shares hit a multi-year low of R26 but has since recovered to above the R60. Since 15-Dec-2017 the share has been consolidating in a sideways to downward range forming a bull flag. On Friday 23-Feb-2018 we saw a massive breakout with the price gaining 13% on the day while the last two days has seen a small consolidation take place.
With global markets softer this morning, we could see the share give back some gains, providing an opportunity for traders to take a buy/long position on this high probability setup.
For this trade idea I would consider it a medium term buy. The company is due to report January 2018 Interim Results around Thursday, 15 March 2018.
I am expecting or would prefer the share to pull back and re-test the breakout level.
Buy EOH below R70 (66/70)
Take Profit: 80.00 and 84.00
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