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GLOBAL EQUITY MARKETS – May 27, 2017

Dear Tech Charts members,

Thank you for joining Tech Charts as Founding Member. I hope to identify many great chart set-ups, trading & investment themes and add value to your decision making process in the years ahead. This week's Global Equity Markets report covers several ETFs from different regions, single stocks from Developed and Emerging countries and equity indices. You will find that some of the themes are longer-term and can offer great opportunity once these chart patterns are resolved on the upside. In this report I also added a section that explains what each label on the charts and section headers stand for. I hope this will make it easier to navigate through the charts.

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BASIC MATERIALS and ENERGY

In the first few months of 2016, strong performance in Gold and Silver resulted in a sharp rally in precious metal stocks. Several oversold gold and silver mining companies had strong performance over the past few months. Similar bullish theme can take place in the basic materials and energy complex. Some of the commodities in the industrial metals and energy group are in the process of forming major long-term bottoms. The same bullish chart set ups can also be seen in the equities of basic materials and energy companies.

LIGHT CRUDE OIL SEP FUTURES

WTI LIGHT CRUDE is possibly forming a H&S bottom with the neckline standing at $50 levels. This chart is still at the early stages of a H&S formation. A few more weeks of strength will complete the right shoulder of a year-long base formation.

BLOOMBERG INDUSTRIAL METAL SUB INDEX

Formerly known as Dow Jones-UBS Industrial Metals Subindex Total Return (DJUBINTR), the index is a commodity group subindex of the Bloomberg CITR. The index is composed of longer-dated futures contract s on aluminum, copper, nickel and zinc. It reflects the return on fully collateralized futures positions and is quoted in USD. This chart has possibly completed a H&S bottom and currently consolidating above the neckline.

BLOOMBERG ALUMINUM SUB INDEX

Formerly known as Dow Jones-UBS Aluminum Subindex Total Return (DJUBALTR), the index is a single commodity subindex of the Bloomberg CI composed of futures contracts on Aluminum. It reflects the return of underlying commodity futures price movements only and is quoted in USD. The neckline of the year-long base formation stands at 28.20 levels.

NMDC LIMITED

NMDC Limited is an India-based company engaged in the mining of iron ore. The Company’s business segments include Iron Ore and Other minerals & services. The Company is also engaged in the exploration of various minerals, including copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite and beach sands. A perfect horizontal resistance (neckline) stands at 105 levels. Breakout above this level will complete a year-long base formation.

FREEPORTMCMORAN

Freeport-McMoRan Inc. (FCX) is a natural resource company with a portfolio of mineral assets, and oil and natural gas resources. The Company’s segments include the Morenci, Cerro Verde, Grasberg and Tenke Fungurume copper mines, the Rod & Refining operations and the U.S. Oil & Gas Operations. It has organized its operations into five primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum mines. This is another perfect example of a year-long H&S bottom with the neckline standing at 14.20 levels. Breakout above 14.20 will be bullish and possibly target 25 levels.

TECHNIP

Technip SA (Technip) is engaged in project management, engineering and construction for the energy sector. The Company operates through two segments: Subsea, Onshore/Offshore and Corporate. This stock is listed in France. Over the past year, 53 levels acted as strong resistance. Stock might be completing a year-long base.

WACKER CHEMIE

Wacker Chemie AG is a Germany-based company engaged in chemical industry. The Company operates through four business segments: WACKER SILICONES, which produces silicone products, ranging from silanes through silicone fluids, emulsions, elastomers, sealants and resins to pyrogenic silicas; WACKER POLYMERS, which offers a range of polymeric binders and additives; WACKER POLYSILICON, which provides polysilicon, and WACKER BIOSOLUTIONS, which is the life science division of the Company, offers solutions and products for the food, pharmaceutical and agrochemical industries. While this base formation does not have the perfect symmetry between the left and right shoulders, it is clear from the chart that the horizontal resistance at 86 levels will be critical in the coming weeks. Breakout above 86 will be bullish.

 

INDIA BSE SENSEX INDEX

Uptrend in INDIA equities is running out of steam. Chart pattern suggests correction in the coming months if the index breaks down the 200-day exponential moving average at 27,300 levels. India BSE SENSEX index might be forming a head and shoulder top chart pattern with the neckline overlapping with the long-term average. Breakdown below a strong technical level like this could be the first warning signal of a deeper correction.

INDIA BSE SENSEX INDEX

Weekly price scale

INDIA BSE SENSEX INDEX II

Daily price scale

Similarly USD/INR formed an inverse head and shoulder chart pattern suggesting weak Rupee if the cross rate breaks above 63.70 levels. I’m still bullish on India in the long-term (you can find earlier analysis here at the time of long-term breakout). BSE SENSEX cleared long-term horizontal resistance at 21,200 levels in 2014. I’ll view the possible weakness as a pullback to the long-term support level.

USDINR

Some stocks that are showing weakness in the Index. Strong long-term trend lines are being challenged. Breakdown on these names can push the SENSEX lower.

BAJAJ AUTO

TATA MOTORS

ICICI BANK

WIPRO

UK FTSE 100 and STOXX 600

A chart that breaks out to all time high levels has the least resistance. It is called the uncharted territory. Prices are expected to resume their trend after a decisive breakout to all-time high levels. This is what happened with some of the indices over the past few years. I attached below some of the strong breakouts to all-time high levels that have taken place. S&P 500 Index, Germany DAX Index and India BSE SENSEX index are some of them.

S&P 500 INDEX

BSE SENSEX INDEX

GERMANY DAX INDEX

More and more equity indices are now breaking out to all-time high levels or at least preparing for strong breakouts. UK FTSE 100 index is one of them. Index closed the week above strong resistance level at 6,950. Few more weeks of strength will confirm the decade-long breakout.

UK FTSE 100 INDEX

Europe continues to gain strength thanks to ECB. Euro Stoxx 600 index is preparing to clear multi-year resistance at 400 levels. I’m not sure if any of these latest breakouts could end up being bull trap. The best available information (latest price information) suggests strength and increase in upside momentum in global equity indices.

EURO STOXX 600 INDEX

MSCI ALL COUNTRIES WORLD INDEX is now challenging multi-year resistance. Decisive monthly scale close above 430 will confirm the breakout.

MSCI ALL COUNTRIES WORLD INDEX

INDIA BSE SENSEX

Markets that breakout to all time high levels usually don’t look back. Price enters the uncharted territory where it doesn’t meet any resistance. Some breakouts fail and fall back below the resistance they breached earlier. At that point we know that something was wrong with the earlier breakout. However most of the breakouts to all time high levels are so powerful and decisive that they don’t leave the price action in question. India’s breakout has been one of those set-ups where breakout to historical high levels from low volatility period is now being followed by a strong upward trend. This is extremely positive for Indian equities and suggests higher prices in the medium-term. I attached below similar breakouts to all time high levels on South Africa All Share index and S&P 500 index. (For earlier analysis on India you can refer here)

INDIA BSE SENSEX

SOUTH AFRICA ALL SHARE

S&P 500 INDEX

INDIA, U.K. and JAPAN

Over the past few years equity markets had strong performance. Developed markets did better than the emerging markets but overall it has been positive for equity asset class. In this update I’m sharing with you 3 long-term charts that can be the center of attention in 2014. Possible breakouts in these 3 markets can add fuel to the equity strength in the following months. India’s BSE Sensex index, U.K. FTSE 100 index and Japan’s NIKKEI 225 index are testing their long-term trend resistances. Breakout above these long-term strong technical levels can result in a multi-month uptrend and attract more investors.

INDIA BSE SENSEX INDEX

UK FTSE 100 INDEX

JAPAN NIKKEI 225 INDEX

INDIA BSE SENSEX and USD/INR

INDIA BSE SENSEX INDEX

Strong price action should be followed by a decisive breakout on the BSE Sensex Index. Since 2007, Sensex tested 21,250 levels for three times and over the past few months price action suggests a breakout to all time highs is very likely. Confirmation of the breakout should come after a decisive weekly closing above the strong resistance at 21,250 levels. 200-day moving average should act as medium-term support at 20,000 levels if the index fails to clear the strong resistance. Breakout above 21,250 levels will push the index towards 25,000 levels in a short period of time.

USDINR

Indian rupee gained strength against the U.S. dollar and this trend is likely to continue towards 58-60 area. Strong equity market should bode well for the local currency.

INDIA BOMBAY SE SENSEX INDEX

INDIA BSE SENSEX

Strength in India’s BSE Sensex Index is no surprise as the benchmark has been testing historical high levels. In September I shared an analysis showing similarities between India and South Africa equity index chart patterns. I think consecutive tests of the historical high levels on the BSE Sensex Index will lead to a breakout and higher levels in the following months. There are usually “double tops” in technical analysis but rarely we see “triple tops”. 3rd test of the historical high level at 21,200 could be a preparation for a decisive breakout. Let’s wait for confirmation. A breakout above 21,200 with a strong weekly bar will be very bullish for this market.