The JSE is falling, but should you worry just yet?
There are mixed feelings in South Africa. On the one hand, we continue to have Eskom shedding its load all over us or banks continue to be downgraded.
And on the other hand, we have a new DA leader (Mmusi Aloysias Maimane) taking over the reins of the DA, which could be South Africa's saving grace.
When you look at the charts, you can see that the mixed news is already priced in. It's priced in such a way that today is D-Day for the JSE. What happens from here could either take the JSE to an all-time high or see it crash and burn to previous lows.
Dramatic you say? Watch this…
Three touches and JSE is ready to go up…or down
Take a look at the daily JSE All Share 40 index chart. You’ll see that the price has bounced three times on a strong support level (the diagonal black line I’ve drawn in the chart).
The first touch was on 14 January 2015 at 42,043 and since then, it’s bounced three times up until today at 47,209.
But now, the JSE has fallen, once again, to the support level. This has tricked many traders and investors to sell their positions because they thought it was end of the upside.
I’ve seen this before. And again I ask… Why sell your stocks and panic when the JSE has just had a normal correction of 4.4% from (49,101 down to 46,933)?
Here’s why you shouldn’t worry just yet
Keep this level in mind…
This is the be all or end all level you need to watch carefully on the JSE. Only once the price closes below this level, should you start to worry about your positions, and the JSE entering in a real downtrend.
But until then, the JSE is just doing what it normally does. Zigs a little down and zags a lot up.
If the 47,194
level holds, we can very easily expect to see the JSE going to its all-time high level at 49,136.
However, and there is a big however. If the JSE decides to break down this level, its next target could fall to 45,468 which could bring huge downside to your stocks.
I’m not sitting on the fence and neither should you!
When it comes to trading and analysing, the trick is not to be sold on any direction the market will go. But rather weigh up the options in a probabilistic order.
When you look at the chart, this is all you need to decide for yourself.
As long as the JSE holds its crucial 49,194
level, I’ll stay bullish and will keep looking for trades for my subscribers.
“Wisdom yields Wealth”
Senior Editor: Trading Tips
: Red Hot Storm Trader
Author: 94 Top Trading Lessons of All Time