$JSETKG Capitulation volume? time to buy for a short term trade?
I've been keeping a close eye on Telkom lately. Since topping out at R100 in June this year, it has more than halved in price during the last few months.
What has caught my eye is the substantial increase in volume that we have seen at these lower levels. This almost gives me the feeling that market participants have started to capitulate which is normally a good indication that the worst is behind us and the stock should rebound. What also makes the current trading levels important is that this range between R45 to R47 as highlighted by the red horizontal support channel, was a significant area of support between the end of 2017 - 2018 from where the stock lowed before starting a massive rally all the way to R100. As can be seen by the RSI indicator, the stock is also extremely oversold and should some sort of mean reversion kick in, i think this presents an opportunity to buy at these lower levels between R45 to R48, for two separate profit targets at R54.50 and R60.50. The shorter term 20 day moving average (blue line) which has provided resistance for the stock on its way down is currently sitting all the way at R60.96 and declining by about R1 a day. Whilst it is always risky to try and catch a falling knife as they call it, i think the chart has some compelling reasons to support an entry point. Keep stops tight below R44 if taking this trade and hopefully with a bit of patience we should see some sort of mean reversion start to kick in on Telkom.
What has caught my eye is the substantial increase in volume that we have seen at these lower levels. This almost gives me the feeling that market participants have started to capitulate which is normally a good indication that the worst is behind us and the stock should rebound. What also makes the current trading levels important is that this range between R45 to R47 as highlighted by the red horizontal support channel, was a significant area of support between the end of 2017 - 2018 from where the stock lowed before starting a massive rally all the way to R100. As can be seen by the RSI indicator, the stock is also extremely oversold and should some sort of mean reversion kick in, i think this presents an opportunity to buy at these lower levels between R45 to R48, for two separate profit targets at R54.50 and R60.50. The shorter term 20 day moving average (blue line) which has provided resistance for the stock on its way down is currently sitting all the way at R60.96 and declining by about R1 a day. Whilst it is always risky to try and catch a falling knife as they call it, i think the chart has some compelling reasons to support an entry point. Keep stops tight below R44 if taking this trade and hopefully with a bit of patience we should see some sort of mean reversion start to kick in on Telkom.
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