This morning we will be looking at two trading opportunities on the local market: Investec Ltd and Bid Corporation.
#1. Investec Ltd (INL)
As a proxy for equity markets, Investec’s share price has advanced strongly year-to-date, advancing just over 11% year-to-date. Whilst this has been a healthy return for those who have been long, traders looking to play a potential reversal may soon have an opportunity to participate. Currently, the technical indicators are starting to reflect a moderately overbought position, with the momentum indicator slowing, while the price is approaching horizontal resistance (a congestion zone) as well as the 200-day moving average. Yesterday we saw a bearish engulfing candle being printed, potentially signaling the start of a reversal. Based on this, traders could look to take a short/sell position using the following levels:
During yesterday’s session, Bid Corp traded near the first identifiable resistance level of R290/291. At a PE of 22x, the share discounts a robust global economic environment however some of the regions which the company is exposed to – the United Kingdom, Europe, China and Australia are currently experiencing weaker economic environments and in some cases showing below average GDP growth. The group’s interim results are due Wed 20 February and should growth exceed 20%, we can expect a trading statement soon however without the trading statement being produced, this would inform us that growth will be below the expected threshold. Whilst the company is fundamentally stable, with a high cash balance, the expectations (PE 21x) may be too high and could pose a threat to the share price in the short term should earnings fail to grow substantially. Should we see the price become extended, and trade near the 288/290 level, it may set up a short/sell opportunity. These are the trade levels:
Short/Sell BID above R289
Take Profit Target: R272