Long base formation on Cotton price might be close to completion with soft agricultural commodity breaching the 5 month-long horizontal resistance at 77.60 levels. The chart analyzes ICE Cotton May 13 futures price. Chart pattern can be defined as an ascending triangle or cup with handle formation with a round base that is spread over a 6 month period. Recent strength comes after low a volatility period thus increasing the likelihood of an upward trend. If cotton price remains above 77.60 over the next few days, we should expect acceleration on the upside towards 83 levels.

After more than 3 year-long downtrend, Chinese equity index SSE 50 is now showing signs of strength. In the last part of 2012, Chinese equities rallied sharply from three-year low levels. Sharp reversal on the SSE 50 Index first breached the long-term moving average at 1,670 levels and then broke above the downward trend line at 1,750 levels. We are likely to see a change in trend in the medium/long-term and this could result in a outperformance for the Chinese equities over the coming months. Latest breakouts are significant and  will have bullish implications for Shanghai indices.

Japanese equities are rising and the Japanese Yen is weakening. These two are not very common comments when we take the Nikkei 225 and USD/JPY medium/long-term price trends into consideration. Nikkei 225 Index has been trending lower in a wide trend channel over the past 3 years. Wide swings have bounced off the boundaries of the downward trend channel several times. With the latest rally from 9,000 levels Japan’s Nikkei 225 Index breached above the 3 year-long trend resistance at 9,850 levels. This is a powerful move and could be the beginning of a larger-scale upward trend. Index will challenge the horizontal resistance at 10,250 levels in the following days. For the latest breakout to be valid and result in further strength towards 11,000-12,000 area, Nikkei 225 Index should not fall below 9,800 levels. In other words index should maintain its move outside of the trend channel.

Few days back I gave POLAND WIG20 Index as an example of a 2 year-long flat range breakout. We are seeing global strength in equities and indices are breaking out of long-term consolidation patterns. Today I’m looking at Czech Republic Prague SE Index. Symmetrical triangles are usually formed as continuation patterns. However, it is always better to wait for a breakout as they may turn into a base formation. In Prague SE Index’s case 1.5 year-long sideways consolidation range is breaking out on the upside and should be called as a base formation. The upper boundary of the consolidation range was at 1,010 levels, which was breached on the upside after today’s strong move. First target for the index will be 1,088. Technical outlook turns bullish on the Prague SE Index.