Here's How Far Sasol Trades Below It's 200-Week, Relative To The JSE Top 40 Index
- Lester Davids
- 8 hours ago
- 4 min read
Research Notes For 16 to 20 June > https://www.unum.capital/post/r1620june
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The chart below puts into context the distance which Sasol trades below the 200-week moving average, relative to the JSE Top 40 Index.
Distance = 65%, The 2nd furthest distance in 20 years.
Previous Post (Friday, 13 June): Trading Sasol: Riding The 8/21-EMA To R100 + Approaching Target
On 23 May, the published price action model highlighted the following: "Strong, Bullish, Look for a pullback to the 8/21-EMA before a move higher. On Frida, the share reached R100, just shy of the R107 to R112 target.
The model reading, as of Friday's close, if as follows:
Overall Trading Considerations:
Current Price Action & Trends:
7-Day Trend: Overbought
14-Day Trend: Very Bullish
Comparison: While the 14-day trend is "Very Bullish" indicating strong upward momentum, the 7-day trend being "Overbought" suggests that the recent short-term buying pressure has been quite intense, possibly leading to a stretched condition in the very short term. This implies that while the underlying trend is strong, a temporary breather might be due.
Potential Trading Approach:
Short Term (Approximately Next 1 to 10 Trading Days):
Model Notes: "Very Strong Move Buyers In Control But Don't Chase-May Fail At Attempt To Hold The Highs-If It Doesn't Hold Then The 8-EMA May Be A Short/Sell Target."
Approach: Buyers are clearly in control with a very strong move, but the "Overbought" 7-day trend aligns with the caution not to "chase" the price. Instead, consider waiting for a potential pullback. If the current high levels are not sustained, the 8-period Exponential Moving Average (EMA) could become a short-term sell target or a level to watch for a possible entry if it acts as support. This suggests a cautious "buy the dip" or even a short-term reversal trade if the highs aren't held.
Medium Term (Approximately Next 2 to 4 Weeks):
Model Notes: "Aggressive Buying But Do Not Chase-Look For Overshoot or Failure to Hold Prior Session Range Highs To Short-Sell Back To The 8-EMA."
Approach: The aggressive buying continues into the medium term. However, the strong emphasis on "Do Not Chase" is reiterated. The strategy suggests looking for an "overshoot" (price moving too far too fast) or a "failure to hold prior session range highs." In such scenarios, a short-sell back to the 8-EMA is suggested, indicating that the 8-EMA might serve as a potential support level after a corrective move, or as a profit-taking target for short positions initiated at overextended highs. This implies an opportunistic approach, potentially fading extreme moves within the broader upward trend.
Long Term (Approximately Next 5 to 8 Weeks):
Model Notes: "Strong Candle Structure (Bullish Attempt) Following A Generally Weaker Trend."
Approach: The long-term view indicates a significant bullish attempt through strong candle structures, especially after a period of general weakness. This suggests a potential reversal of a prior downtrend or a strong continuation of a new uptrend on the longer timeframe. This points towards a more sustained bullish outlook in the coming weeks, potentially indicating that any short or medium-term pullbacks could be opportunities within a larger upward trajectory.
Overall Trading Considerations:
Consistent Bullish Momentum (Medium to Long Term): The 14-day trend is "Very Bullish," and the long-term outlook shows a "Strong Candle Structure (Bullish Attempt) Following A Generally Weaker Trend." This indicates a sustained underlying upward bias for SASOL over the next several weeks.
Short-Term Caution & Opportunity: The 7-day trend being "Overbought" and the short/medium-term advice to "Do Not Chase" suggests that while buyers are in control, the price may be extended in the immediate future. Traders should look for pullbacks (e.g., to the 8-EMA) as potential buying opportunities or even consider short-term fades if highs are not held, before the next leg higher.
Strategic Entries: The emphasis on waiting for pullbacks or failures at highs rather than chasing the price is a key theme across the shorter timeframes, aiming for more optimal entry points.
Potential for Significant Upward Movement: The strong bullish attempt in the long term, following a weaker trend, suggests that SASOL could be entering a more significant upward phase.
In essence, the current view is bullish across the medium to long terms, with strong underlying momentum. However, short and medium-term traders should exercise caution regarding current price levels, looking for strategic entries on pullbacks or potential short-term reversals from overextended positions, within the context of the broader upward trend.
Previous Post (Tuesday 10 June): Trading Sasol: Pullback To 8-EMA Followed By Upside Follow-Through + Updated Model Reading.
The share is in line with the model reading which stated that the 8/21-day EMA range was a level to which the share could retrace into before potentially moving higher. Since then we saw the price consolidate, re-test the 8-day EMA then rally to a multi-month high today (Tuesday, 10 June). the 200-day simple moving average and 50-week exponential moving average is a possible resistance range in the ultra short term. Above that R107 to R112 is a broader selling/resistance range while a pullback into R76 to R79 could offer another re-accumulation range.
Previous Post (26 May)
How To Trade Sasol, and
Recent Opportunities via the Price Action Model
The share has had a strong rebound off the 09 April lows (5301c) to it's recent high of 8662c. In the process, the 50-day EMA was reclaimed with strong candle structure reflecting strong buying interest. The current two-day retracement (from +8600c to 7900c) appears to be the start of a re-test of the 50-day exponential moving average (which has now started to turn up). For active traders looking for a buy re-entry range, the 50-day EMA (at or just below) is a provisional range. We are marking 6900c to 7300c for now. The 200-day SMA continues to trend down, which could act as a temporary resistance range.
Recent Opportunities: Time-stamped examples from the price action model.
INTO THE LOWS (04 April): "Aggressive selling underway, however the buy/long reward-to-risk may be attractive".
INTO THE HIGHS (20 & 21 May): "Aggressive buying underway but overbought on the lower time frames. Expect a consolidation or a minor retracement".
Lester Davids
Senior Investment Analyst: Unum Capital
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