Sasol Limited (JSE: SOL), a prominent player in the chemical and energy sectors, has recently attracted attention due to fluctuations in its share price. Amid a challenging economic landscape, Sasol has faced substantial market scrutiny, with its market value plummeting by over 25% year-to-date, indicating waning investor confidence. However, a glimmer of optimism emerged last week as the company’s shares rallied by 5.68% following several weeks of losses.
The downturn in Sasol’s share price can be attributed to various factors, notably challenges in its Mining and Secunda Operations, which contributed to a downward revision in volume expectations. Operational headwinds in its core Mining and Secunda Operations are expected to limit production volumes to a maximum of 7.1 million tons for the year, falling short of the initial guidance of 7.3 million tons.
Additionally, subdued prices across the chemicals sector, fuelled by global economic conditions and weakened demand in key markets like China and Europe, further dampened investor sentiment. Sales revenue in this segment was down 15%, with average sales basket prices plummeting 20% compared to the same period last year. As Sasol navigates these operational and market challenges, the question arises: can the recent rebound in its share price be sustained?
Technical
Sasol’s recent price action reflects a nuanced interplay of technical indicators and market sentiment. Trading within a downtrend, the share price dipped below the 100-day moving average, signalling bearish momentum.
Initially, a brief upturn aligned the share price with this moving average, but overbought RSI conditions stifled further gains, resulting in a resistance level of R173.80 per share. Subsequently, the share price retreated, finding support at R121.85 per share amid oversold RSI conditions, prompting a rebound.
Currently, the price has retraced past the 23.60% Fibonacci Retracement level, indicating potential for further upside. Should bullish momentum persist, the 50% Fibonacci level may become a focal point for upside targets. Conversely, a resurgence of bearish pressures could lead to a retest of the R121.85 support level.
Summary
Sasol’s resilience is tested amidst operational challenges and market uncertainties, with shares plummeting 25% year-to-date. Despite a recent 5.68% rebound, attention turns to pivotal technical levels such as the R173.80 resistance and R121.85 support, shaping the stock’s trajectory amidst evolving market dynamics.
Sources: Sasol Limited, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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