Shares in property group Redefine may be on the cusp of a breakout if recent levels are breached.
The line chart below shows some classic profit taking (a waterfall formation), but the recent V reversal, which is positive, confirms that some keen buyers are back, as does a recent jump in volume of shares traded.
Buyers of Redefine shares will be happy above line A (R4.58), which denotes the 40-week moving average. It is still a resistance level for the stock, but a move above this long-term moving average may see more positivity among buyers.
Take note that line A and the 40-week moving average are close to each other. This confirms the importance of this point on the chart.
Above line A, we may see the V reversal formation continue, the 40-week moving average become a support level, and R5 become the potential target price.
Below R4.13 the share may fall further, with a low of R3.70 on the cards.
For investors: buy or consider a long position above R4.58 a share if you believe that the “volume buyers” are right, but use R4.13 as your stop loss to protect capital.
For medium- to long-term investors, keep in mind that the 40-week moving average is generally a great barometer to measure investment sentiment. Above the average, buyers are happy to invest, while below the average, investors may be nervous towards the stock.
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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