DOW short term downtrending since Feb 22,2011. The downtrend did a total net correction of around 6.8% from the 52week high of 12400, and from our expected correction of 8-10%, this seems to be a good entry point already. Seeing the Daily Charts, the DOW went to as near as the medium term uptrend support of 11500-11700 and went into an oversold RSI level. I managed to buy and went 30% in on that day itself when DOW hit 115xx intraday low, feeling that it might be the short term downtrend bottom already.
In terms of Elliot wave Analysis, It’s a clear cut picture with 2 more possible scenario.
1. Allotting wave a,b,c in the chart simplifies it’s the short term bottom already for Primary Wave 2 and we are going into the Primary Wave 3 enormous rally until May 2011.
2. We are still in wave a, and wave c is on the moves to get another round of 3-4% downturns into a max 4 weeks timeframe.
Analyzing DOW’s Weekly Charts, That quick selloff gave us a weekly RSI low of 40 on this bull market, usually selloffs below the neutral level of 50 gave only 2 scenario:
1. A good correction
2. A slow hint that equities are shifting into a downtrend scenario.
But at this point, I strongly believe that we already got the correction we were expecting few months back, and our bull market continues. A visit back to the 11500 support would be a 2nd opportunity to get back into the market.
PSE 5month continues decline is also hinting that we already hit the bottom in this medium term downtrend. Over the past few weeks, RSI and MACD is hinting a good positive divergence, and this correction gave us a good entry point again sending few bluechips to an area of 10P/E ratio. (FGEN,PIP,FPH - to name a few). Others which are highly overpriced for a PE ratio of 20-30PE still strong and not convinced by the downtrend (ICT,SMB,PCOR, JFC – to name a few).
Major resistance waiting to light up this market is on top of the 3970-4000 resistance, a breakout of that will lead us to 4200 strong resistance level that can temporarily pause the market and so on to hit the 52 week high. At this point in time, a correction behaviour to 3600-3750 or even 3800 is a good “entry” level plus the rising MACD/RSI and 200MA.
Personal Disclosures:95% : 5% cash- PSE market
55% : 45% cash- Asian Equity Markets
Disclaimer: some charts are used for presentation use only.
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