French auto industry is showing signs of strength and offering major breakout opportunities. September 30, 2017 Global Equity Markets report featured the breakout from a multi-month base formation on the long-term price chart of PEUGEOT AS. This interim update highlights another major opportunity that is taking place in the same industry.
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Students of charts and mainly classical charting principles have to maintain an unbiased view of the markets. A chart pattern that is identified on a price chart should be the result of pure price action analysis. A global macro view on a commodity or news flow regarding a company can result in second guessing your analysis. Most of the equity traders, unlike FX and commodity traders are used to looking at charts from the long side. In other words, picking opportunities that are breaking out and trending higher. Over the years, I found the method of looking at charts on an inverted scale very useful in order to challenge any biased view I might have. I believe that applying this technique will help you to overcome any bias during your analysis.
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The XAU is a capitalization-weighted index of thirty precious metal mining companies that has been traded on the Philadelphia Stock Exchange since 1983. As its name suggests it includes both gold and silver mining companies. In order to track gold and silver mining companies performance in an index there are several options available for investors, but the two most watched indices are: the NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (called the HUI Index) and Philadelphia Gold and Silver Index (called the XAU Index). Below chart features the Philadelphia Gold and Silver Index. Also this week's report highlights several great bearish chart setups on Silver mining equities and ETFs.
Over the past 10 months the Philadelphia Gold and Silver Index has been in a sideways consolidation. The index is possibly forming a symmetrical triangle that can act as a bearish continuation chart pattern. Several bearish chart setups in the junior mining companies and ETFs suggest that mining stocks can come under selling pressure in the following weeks. The lower boundary of the 10 month-long symmetrical triangle stands at 80.3 levels. This week's price action reached the lower boundary of the possible symmetrical triangle. I will monitor the strong support at 80.3 in the following weeks. A breakdown of the multi-month consolidation can result in a downward trend on the XAU index.
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This was another week of strong global equity market performance. Benchmark for the global equity market performance, the MSCI All Country World Index ETF (ACWI.O) remains in an uptrend above its 19 month-long trend support. Both the long and short-term charts are showing steady uptrend for the ACWI. At this point there is no clear chart pattern that would suggest a reversal of the strong uptrend.
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India equity benchmarks have been in a steady uptrend. For the past few months the BSE Sensex index and other equity benchmarks has been in a sideways consolidation. These short-term consolidations can prove to be bullish continuation chart patterns if resolved on the upside. On the long-term chart of BSE Sensex Index, 30K levels continue to form strong support. Long-term uptrend remains intact. Below I featured some of the bullish chart setups on India equity ETFs that are listed on the Nasdaq and New York Stock Exchange.
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During a steady uptrend, pullbacks to long-term averages and to long-term trend line supports are usually good places to add to existing or enter new long positions. These pullbacks are usually a breath-taking period or a pause during the uptrend. As the pullback develops, it can either take the form of a top reversal formation or a continuation. A continuation chart pattern usually indicates the resumption of the uptrend.
There are two important chart developments on Alphabet Inc. and Johnson & Johnson that are worth mentioning. Both stocks have been in a steady uptrend. They are rising above their well-defined multi-year upward trend lines. Over the past 4 months, both equities formed a short-term sideways consolidation that can be identified as a rectangle. Given the direction of the previous trend, these rectangles can act as bullish continuation chart patterns.
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It has been a volatile week for Spanish politics and the country's financial assets. Spain's IBEX 35 index has been trending lower since May 2017. The downtrend in the short-term formed a well-defined trend channel. With this week's sell-off, the index rebounded from the lower boundary of the trend channel. There is no classical chart pattern that would suggest that index is finding a bottom or another chart pattern development that would signal further downside. However, two interesting candlestick patterns drew my attention which I find worth mentioning.
At inflection points, markets give clues about the internal dynamics of the price action. These are better identified on candlestick charts. The weekly chart of the IBEX 35 index formed a hammer. This bullish reversal candlestick pattern becomes more important if it forms at important support areas. We can see 3 important technical levels overlapping at 10,000 levels. These are; the lower boundary of the 5 month-long downward sloping trend channel, the 200 day (40 week) moving average and the year-long upward trend line.
Hammer is a bullish reversal pattern that forms after a decline. In addition to a potential trend reversal, hammers can mark bottoms or support levels. After a decline, hammers signal a bullish revival. The low of the long lower shadow implies that sellers drove prices lower during the session. However, the strong finish indicates that buyers regained their footing to end the session on a strong note. While this may seem enough to act on, hammers require further bullish confirmation. Confirmation could come from a gap up or long white candlestick.
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Uptrend remains intact for the emerging markets index. MSCI Emerging Markets Index cleared decade-long trend resistance at 1,015 levels and continues to trend higher. Strong support remains between 1,000 and 1,015 levels. Last one week's pull back is possibly finding support at the lower boundary of the year-long upward trend channel. Weekly candlestick pattern (hammer) on iShares MSCI Emerging Markets Index ETF (EEM) is featured in the following chart. Hammer candlestick pattern at support area can signal a bullish reversal.
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Member Webinar and Q&A with Peter L. Brandt and Aksel Kibar - Recorded live September 21, 2017
Opening discussion/presentation by Peter and Aksel
Live questions from Members
