ArcelorMittal South Africa received a shot in the arm last month when one of its key backers, the Industrial Development Corporation, pledged R1.2bn to keep it afloat on condition that it explore a sale of parts or all of its business. The share is therefore to be approached with caution.
The line chart shows a possible symmetrical triangle, denoting uncertainty, with line A and the 50-day moving average almost at the same place. This is an important point on the chart.
A possible symmetrical triangle can break to the upside or downside. The chart formation also often occurs after a nasty selloff and is regarded as a point of consolidation, where buyers and sellers decide what to do next.
Above line A (R1.14), the triangle may break to the upside and chase the full target of the formation of R1.44 a share. Buy or consider a long above R1.14, but use R1.03 as a stop loss to protect capital.
If the share price breaks below R1.05, it would be wise to walk away. As long as the 50-day moving average is a resistance, we may assume that the trend is still to the downside, which is negative. However, a move above the 50-day average would be the first indicator of technical strength.
This trading suggestion reflects the personal opinion of the writer and must not be taken as financial advice.
Frans de Klerk is an independent technical analyst.
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