Nedbank - Breakout from Bearish Pennant

South African banks are bearing the brunt of the economic impact of COVID-19 and lockdown.

Fundamentals:

• Prior & ongoing recession
  
• Weak ZAR
  
• Low interest rates (limited profitability)
  
• Decreased business activity
  
• Pervasive credit losses & impairments
  

Technicals:

• Breakout from bearish pennant
  
• Decreasing RSI (not oversold yet)
  
• Share price below 6SMA & 20SMA
  
• 6SMA crossed 20SMA to the downside
  

A retest of the March lows is possible.

Target 1: 78.00
Target 2: 67.30
Stop Loss: 113.51

Our banks are robust and well-positioned to weather the current economic storm. Their price-to-book ratios are currently incredibly low and make for an attractive long-term play. The short-term outlook, however, is bleak.