Long SasolStrong sell off in oil offers potential upside
Large capex for increased production
Long term hold
SOLBE1 trade ideas
JSE:SOL Sasol Mark-up ContinuingStarting a new post for October to track the structure of SOL (See link below for Septembers post). Last month it looked like the markup had started and trading in a strong upward channel. At the end of the month the lower support line seemed to have broken. However, there has been effort to break the trend without response (high down volume but no progress in price). This effort is also seen in the negative divergence of price with the OBV. The 50 SMA seems to be a level of interest for buyers. If the 50 SMA is broken there could be more downside back to the accumulation range. If it holds and we could see a further markup to levels around 61800 and possibly even breaking the previous high at 65200.
$JSESOLJSE:SOL
Small continuation formation made and broken on shorter term $JSESOL chart. Target 52800/53000
SOL J - ShortLevels:
Entry: 56300
SL: 58557, eg just above the Aug 30 high 2257
TP1: 52240
TP2: 48420
Why:
(1) Technical rejection of the August 30 highs - eg. 3.4% rally followed by complete reversal to opening. N.B: This on a backdrop of a USDZAR (orange) and WTIOIL (red) rally.
(2) Potential overextention of the recent USDZAR rally.
(3) Alternative equities trade to shorting an oil contact, as it approaches the sell zone. (70-70.50 for the CL1!)
What could go right:
(1) Rand and Oil are reversing and taking SASOL with it.
(2) General bearish bias for EMs follows through.
(3) Fundamentally (a) escalation of strike action in the first days of September and (b) unexpected supply interruptions in their ZA operations (coal or electricity).
What could go wrong:
(a) Continued (over- :-) ) extention of ZA equities of which SASOl profits.
(b) Escalation of the USDZAR devalutation. All things being equal, it's a rand hedge for local pension funds.
(c) Escalation of global oil futures due to X, Y and Z
Sample Trade:
Risk: R5000
Size: 220
Profit: R17400 (based on TP1)
R/R: 3.49
JSE_SOL: Wyckoff - Sasol Accumulation CompleteFollowing the Wyckoff logic: Sasol has been under accumulation with bids coming in at 36000. Volume has been declined since 2017 showing the stock has moved to strong hands and the markup has started. Will wait for a backup to the trading range which would label the market to be in Phase D or pullback in which would indicate we are already in Phase E. But semantics aside the markup is starting and it would be good to find a good place to enter to ride the trend to the highs or even new highs.
Ascending TriangleJSE:SOL has broken through the ascending triangle that we saw forming a few days ago.
SOL Short- broken a key trend line (blue)
- My instincts tell me that a retracement needs to happen
- Volume Profile thins out "somewhat" from here down
Hammer ShortSSl recently has been recovering from a market correction. However, even tho the coppock curve and the ADX are saying this could be a buy, I see a hammer candlestick forming. This shows that the prior trend could be changing. So, I put a short position below the 50 MA. Also, volume seems to be decreasing.
