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SUSARI GELDENHUYS
SAFEX SCENARIO ’ S WITH SUSARI
INTRODUCTION Price volatility is one of the most important characteristics of the South African agri-market . The current price movements in the market are therefore no exception . However , the price level at which these movements take place , has moved . Grain prices are trading at historic high levels and uncertainty ( and therefore volatility ) is expected for the coming season . The larger extent of volatility makes for difficult investment and hedging 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 an investment or hedging decision is considered .
Fundamental analysis and the basis of technical analysis were discussed in previous articles and this article will focus on the various technical price graphs .
PRICE GRAPHS Four main types of price graphs are used , namely a line chart , a bar chart , a candle-stick chart and a point and figure chart . The latter graph is generally not used in the South African agri-market and will therefore not be discussed in this article . The graphs are analysed over a given trading period . The trading period is represented graphically on the x-axis ( horizontal axis ) and the period can vary
Figure 1 : Line chart .
depending on the specific needs of the analyst . Prices are represented graphically on the y-axis ( vertical axis ). As a rule on Safex , price data shorter than one day is used for short-term decisions , daily or monthly price data is used for medium-term decisions and monthly price data for long-term decisions .
1 . Line chart The line chart is the simplest representation of price data used by various role players . A line chart is a graphic representation of closing prices over a given period and every data point is linked by a straight line . Closing prices are mainly used in line charts since these are mostly regarded as the most important price compared to the highest , lowest and opening price for a specific trading period . Analysts often prefer the line chart since a lot of the intra-day volatility which arises during the trading period is omitted and longer term trends can be identified easier . However , the reality is that the line chart , by implication , limits more in-depth price analyses . Figure 1
SOURCE : COMPILED IN THOMSON REUTERS ( 2016 ) DATA BASE .
Figure 2 : Bar chart interpretation .
SOUCE : COMPILED BY THE AUTHOR .
is a graphic representation of a line chart .
2 . Bar Chart The bar chart is a graphic representation of a series of vertical lines made up of the opening prices , highest prices , lowest prices and closing prices . The opening and closing price are represented by a horizontal marker on the left and right hand side respectively . The low for the trading period is represented by the bottom of the vertical line and the high for the trading period is represented by the top of the vertical line . Should
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36 AUG / SEP 2016 • SENWES Scenario