We wrote about British American Tobacco in the US but on the local exchange the British American Tobacco graph caught our attention. This company’s biggest threat is still the sale of illegal cigarettes. It results in a loss of between $40-50 billion in taxes globally.  The company of illegal cigarettes makes it the third largest tobacco company in the world. About 8 million adults in SA smoke 27 billion cigarettes a year. The latest stats show that the Western Cape smokes the most with 42% of men and one in every four women smoke.

  • The share is caught within a symmetrical triangle between line A (R661) and line B (R634-12).
  • The triangle will be confirmed with the break above line A and the full target of the formation of the formation should it play out is R740.
  • Below line B the formation will be wiped off the table.
  • There are also two windows waiting higher between R716-97 and R720-18 and between R777-91 and R785-23.
  • The 20 and 40 day moving averages work well on this graph, and we can see they were tested in May but the 20 day moving average (green line) was not strong enough to break through the 40 day moving average. However, it seems as if the 20 day moving average is building momentum again and it will be seen as positive if the 20 day moving average breaks through the 40 day moving average.
  • For traders – Buy above line A but use R643-96 as stop loss to protect capital. The possible targets towards the top are R675, R687-51, R698-34, R716-97 (opening of window), R720-18 (closing of window), R728-91, R734-45 and R740.
  • For medium to long term investors – The share has started to build a base and it is clear that they are supporting the share price around current levels. Do the same as the traders above. There is also a positive divergence on the stochastic on a weekly graph.

Don't hesitate to ask if anything is unclear.

Frans & Christelle