••••
CO L U M N
Safex Scenarios
with Susari
SUSARI GELDENHUYS
INTRODUCTION
South African grain prices have
been known to be very volatile
due to uncertainty about what the
future holds for the grain mar-
ket. Future stock levels, imports,
hectares planted and yields are
but a few of these factors which
cause uncertainty (and therefore
price volatility) in the market.
These volatile conditions make it
difficult for all market participants
to make good hedging and invest-
ment decisions. However, there
are two general aids in the form of
fundamental analysis and technical
analysis which will contribute to a
higher probability of success when
such decisions are considered.
Fundamental analysis and the
basis of technical analysis were
discussed in previous articles. The
last article focused on determining
support and resistance levels. This
article will expand on this by ana-
lysing various price formations.
PRICE FORMATIONS
Price formations can be defined
as a graphic price movement
pattern which is determined by
various support and resistance
lines. There is a high probability
of success when the formations
are recognised and interpreted
correctly. The most generally used
formations, which usually indicate
a trend reversal include: Tops and
Bottoms, and Head and Shoulders.
Tops and Bottoms
As one of the most commonly
used formations, Tops and Bottoms
can be identified and interpreted
relatively easily. The formation
normally indicates a trend reversal
after a support or resistance level
has been tested various times, but
could not be broken successfully.
Various Tops and Bottoms can form
with the respective names leaving
nothing to the imagination. A
Double Top or Bottom indicates a
resistance or support level which
has been tested twice and a Triple
Top or Bottom indicates a level
which has been tested three times.
A top (bottom) formation is
mainly formed by determining the
horizontal resistance level (support
level), after which the adjustment
serves as horizontal support level
(resistance level). Should market
Formations which normally indicate a continuation of the preceding trend were discussed in the previous article.
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APRIL/MAY 2017 • SENWES Scenario