Over the past couple months, Vodacom has seen its share of fundamental issues causing its share price to drop over 19% between the 5th September 2017 and the 4th October 2017.
The first event happened on the 5th September when it was announced that Vodafone, Vodacom’s parent company, was to be selling a chunk of its shares worth over R15 billion to meet the JSE’s 20% free float requirement. This caused the shares price to drop over 8% from R178,90 to R164,02.
The second event happened on the 4th of October when it was announced that the Competition Commission is investigating Vodacom for alleged abuse of market dominance in securing a mobile services contract with the government. This announcement saw the share price drop to a low of R142,11 but managed to regain 5% on the day to close at R151.
Since then trading has pretty much been range-bound, hovering around the major support zone at R147.
Looking at the chart:
The 50 Day Moving average appears to be turning down, should it cross below the 200 Day moving average and we see a strong break below the R147 support area, this would send a clear signal to investors that we could be seeing further downward movements with possible targets of the next major support area at R146,60 and possibly R145,00 in extension.
Should the price stay above the R147 support area and the 50-day moving average fail to cross below the 200 Day moving average, it could open up a path to the next resistance area at R167,60.
I think trading is going to be slow over the next couple of weeks while investors weigh up the fundamental issues but at the current attractive price, its primed for a long entry.