Net1(UEPS) May Have Found A Bottom
Posted by barkand on May 11, 2011 under Bollinger bands, Candlestick charts, xattascope | 
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Net1 (UEPS) has been in a severe downtrend, losing one-third of its market value just since the beginning of the year. However, the last three trading days strongly suggest that the bottom is in for UEPS shares.
The dragonfly doji on May 6 followed by higher closes the next two days is a strong signal that the market has changed. When you add in the strong volume on all three days, it makes the situation look that much more positive. [ By the way, the spark for the change in sentiment was an earnings report - the company reported a loss.]
We were curious about that dragonfly doji, so let’s take a look at it under the xattascope. Below is a 15-minute chart covering the last five trading days. The initial selloff following the earnings release was not a matter of a few panicked trades. It lasted more than half an hour, pushing the share price far below the lower Bollinger band. Notice how the market caught its breath around noon New York time and started moving higher. When prices make a bottom within the bands after making a bottom outside the bands, it often leads to a trend reversal.
And what should we do now? In this case, we can advise a 3 step approach:
- Nibble a bit now.
- If UEPS can close above its 20-day moving average, buy some more. Notice that the shares were repelled from it yesterday.
- If the 20-day moving average turns up and the price action is still positive, you can add to your position.