An interesting stock (2011-09-29 Esprit analysis)

Growing concerns in Europe debt crisis continued to well drag the global market indexes down. US and European markets were down over 1% yesterday, and today's Hong Kong market could hardly rise.

While the market is not clear at all, today I am going to post the stock that you should be extremely familiar with these days, which had dropped almost 50% in just 3 single trading days.
















Above chart is the daily chart of Esprit holdings (0330.HK). I guess you all know the company focuses on retail industry and sells clothes.

After end of 2007, the stock price has been sliding downward gradually, due to investors' shrinking expectations on its revenues, especially after financial crisis. Profits were expected to plunge a lot.

So starting from June 2011, the price moved along the red downward trend line as shown in the chart, and slowly dropped.

Serious slump happened after announcement of its Final results, which their profits were down greatly. Soon after this announcement, the price fell below 10 from 18 in just three days.

Now, it looks like it has bottomed at least these few days, and may rebound. But there are still quite a lot resistances.

For example, the red line provides quite strong resistance at around 12. The 10-day SMA has just successfully resisted the price from spiking.

On the other hand, the previous low at around 7.6 would become next support, hopefully the price doesn't drop lower than that.

MACD and its EMA touch each other, so we still have to wait and see whether there will be a bullish cross or not. If yes, then it's quite likely the price would go higher than 12 as well.

Levels for Gold (2011-09-28 XAU analysis)

Above is the daily chart of Gold (XAU=). It is really one of the markets that we would have to pay attention on recently.

After a long surge to over 1,900, the gold price plunged hard in previous few days following the OT measurement.

In fact, when we looked back in late August, there was a MACD divergence. This divergence has already warned us about possibility that the crazy strong buying-force would come to an end and the price of gold would slump.

After the great drop to 1,534, I drew a fibonacci retracement using this level and the high at 1,920. We can see that there is strong resistant at 38.2% level and strong support at 23.6% level.

So this fibonacci retracement does work on letting us predict the levels. If 38.2% breaks, then 50% which is around 1,720 would be the next resistant.

On the other hand, if 23.6% breaks, then the previous low at 1,534 would be the next support.

If we check the stochastic slow, we can find that these few days it has shown a divergence too. The price of Gold dropped greatly but stochastic actually rose a bit. So this divergence might tell us that Gold would at least rebound, or even head to the previous high again. I would generally have a more bullish view on Gold.

Trend changed (2011-09-27 EUR analysis)

Above is the 4-hour chart of EUR/USD. After late August, Euro has been undergoing a downward trend and reaching lower levels.

The red line represents the downward trend, which has successfully resisted the currency a few times.

Currently, EUR climbs to the red line again. We have to keep an eye on whether it would break out, and I think the chance is quite high.

MACD and Stochastic slow both shows a divergence recently. This shows that the price should be having a trend reversal and that EUR would start moving in bullish trend.

EUR could not break down after two trials, and that means the buying force of Euros at that level is quite strong.

So I think Euro would break out, support levels are predicted using fibonacci retracement: 1.361, 1.381, 1.354.

How would it go? (2011-09-26 HSI analysis)

Finally I have settled down at Warwick, being ready to start a year full of Mathematics. Look forward to learning more!

Last week was a disaster for long-only investors, but might be a great week for those who was in short positions. Operation Twist proposed by the Fed and concerns resulted in plunges in world's stock markets.

Hang Seng Index broke 18,000 and reached as low as 17,373 last Friday. After checking the daily chart of HSI, it appears to me that we can hardly tell anything from daily chart.

So I decided to move on to weekly chart.














As mentioned before, a bearish flag was identified clearly on this chart. In the middle of the bearish trend, the red flag indicates a further bearish trend.

As usual, purple pitchfork is the main tool here. We can see that the index broke the lowest line of the fork, meaning a even steeper downward trend.

Using the high in late 2010 and the low after financial crisis, we can see that HSI just broke the 50% retracement level too. Next retracement level is at around 16,100.

So this week depends on whether HSI would continue dropping or get back into the pitchfork.

If HSI drops again, 16,100 will be the next support. Pitchfork becomes a resistant at around 18,200.

If HSI bounces, it is still under a bearish trend, but will slump more slowly. 19,500 will be a major resistant level.

Important Economic Data this week (2011-09-25)

26-Sept (Monday)
22:00 US New Home Sales {Forecast: Slight drop}

27-Sept (Tuesday)
22:00 US Consumer Confidence {Forecast: Rise}

28-Sept (Wednesday)
20:30 US Durable Goods Orders {Forecast: Drop to negative}

29-Sept (Thursday)
Germany Consumer Price Index (YoY) {Forecast: Unchanged}
20:30 US GDP {Forecast: Slight increase}
20:30 US Personal Consumption {Forecast: Unchanged}

30-Sept (Friday)
20:30 Canada GDP (YoY) {Forecast: Slight increase}
21:55 US U. of Michigan Confidence {Forecast: Unchanged}

Resisted again (2011-09-23 VIX analysis)

Global bear market as mentioned on Bloomberg news... 18200 breaks and the next support would be 15900. Looks nothing too serious happened these days, the recent plunges were just driven by Twist Operation in US and again concerns and worries. Is it really news that can bring the indexes down to record lows in like 2 years?
















Above is the daily chart of Volatility Index (.VIX). I made it to a longer period in order to see a general trend.

Actually there was no specific trends. We can see that VIX repeated the process of moving lower along a trend line, breaking out to a high level, and undergoing another downwards trend.

Breakouts are indeed predictable. We can see that MACD was always showing a divergence pattern when VIX was moving downwards.

This time it looks like there is a small divergence in these few days. But the difference is this time the index is spiking but MACD is shrinking.

Though there was a breakout of the green wedge, I somehow predict a slump back into this wedge and the index would reach the support at around 30.

Upside risk is still at 50, which is an extremely strong level resisting the index. It really depends on whether there is any news that is horrible enough for most investors to sell their stocks, but I still don't foresee one in very near future.

A short lesson (2011-09-21 CLP Holdings analysis)

Today let's take a short lesson on Technical.
















Charts speak.

Be aware of the current MACD divergence, which might indicate that CLP is not going to break the lower red up-trend line. But anyway the level can go up because of price surge.

Good luck.

How about the US market (2011-09-20 SPX analysis)

Daily chart of S&P500 Index (.SPX):















On daily chart, the index obviously is moving within a flag-shape pattern. This flag started with the low at 1101, and was upwards sloping.

Currently, SPX is at the very middle of the flag. It is hard to tell which way it is going to move, but we can keep aware of the support and resistant levels.

Considering again the red flag, we can find the resistant at around 1,260 and support at 1,170. These are the major levels we have to watch.

Another important observation is that stochastic-slow is showing a divergence regarding the movement of the index. This shows that the rise of SPX is relatively weak and would probably plunge.

Breakdown of the flag shape will further confirm the flag as bearish continuation flag in the middle of the bearish trend, signaling further slump.

Weekly chart of S&P500 Index (.SPX):















Weekly chart basically tells the same story. In addition, I have added a fibonacci retracement using the high and low in April 2011 and June 2010.

We can see that the levels are pretty strong in terms of supporting/resisting SPX.

On the other hand, MACD and its EMA is touching each other. We have to wait until the end of this week to confirm whether there is bullish cross or its just a zig-zag.

So the support and resistant levels are almost the same: 1,170 and higher than 1,250.

Good luck.

Break of flag shape? (2011-09-19 HSI analysis)

UBS trader losing 2B... He used to be a star earning a salary of £600k a year. Good luck to him.

Last week world's stock markets fluctuated quite greatly. At first, debt problem in Greek seemed to be unsolvable. Global stock markets just plunged hardly. Then, suddenly all the issues seemed to be eased due to consensus in European Union. Stock markets surged again. News-driven traders did really have to pay a lot of attention!

On Friday, EU ruled out the proposal by US suggesting EU to expand its rescue fund. But I think it should be kind of disgusted and have not much effect on today's market. So let's see how this week HSI is going.

Daily chart of Hang Seng Index (.HSI):















After the strong rebound on last Friday, Hang Seng Index was able to pare its losses on the days before and remain above the green up-trend support.

That three candlesticks showed a false breakdown, which meant that the index could not break below the flag shape continuation pattern.

Now HSI is still within the flag, and the next resistant is given by the red down-trend line at around 20,000.

Then the next resistant is provided by the upper line of the flag pattern, at around 21,000. These two levels are something we have to keep in mind.

As for downside, the lower line of flag-shape pattern is sloping upwards. The support level will keep on rising and the support is at slight higher than 19,500 by the end of this week.

This week I have no specific view on the index based on daily chart. It really depends on whether the index would break down again. So let's check out weekly chart.

Weekly chart of Hang Seng Index (.HSI):















The flag shape is clearer on weekly chart. This bearish flag continuation pattern means a further plunge of the index.

As usual, the purple Pitchfork was added and it has been an extremely good instrument to predict HSI's movement.

Upside resistant is at 20,000 given by the middle line of Pitchfork. Interestingly, this is the same level as suggested by the short-term down-trend resistant on daily chart. And once we can see that the Pitchfork helps a lot on finding trend lines.

However, on weekly chart, it seems controversial that whether the index closed above or below the green line. It looks pretty much at the line. So we have to see what happens today.

If HSI really breaks down, then the next support given by the Pitchfork is at around 18,200. Breakdown of it means the index plunging to at least 15,800 as mentioned before.

My view is more on the bearish side. But it depends on whether HSI breaks down. If not, then it would rebound and face resistant at 19,500 and 20,000.

If yes, then the only level to be aware of is 18,200. I don't expect the index slumping any further than this.

Important Economic Data this week (2011-09-18)

20-Sept (Tuesday)
09:30 Australia Reserve Bank's Board September Minutes
14:00 Germany Producer Prices {Forecast: Unchanged}
17:00 Germany ZEW Survey (Economic Sentiment) {Forecast: Drop from -37.6 to -45}

21-Sept (Wednesday)
16:30 Bank of England Minutes
19:00 Canada Consumer Price Index {Forecast: Slight increase}
22:00 US Existing Home Sales {Forecast: Slight increase}

22-Sept (Thursday)
02:15 US FOMC Rate Decision {Forecast: Unchanged at 0.25%}
06:45 New Zealand GDP (YoY) {Forecast: Slight increase}
22:00 Euro-Zone Consumer Confidence {Forecast: Slightly more negative}

source: http://dailyfx.com

Gold dropping to Golden ratio (2011-09-16 Gold analysis)

European Central Bank is giving out loans to banks to ease the credit crisis. With lower chances of default and liquidity is increased, all the US and European stock markets surged. German market boosted over 3% while S&P500 rose more than 1.72%.

Today Hong Kong market should be following this rally and Hang Seng Index would probably go up by 500-600 points.

Stock markets going up usually means that safe haven plunging. Let's see Gold.
















Above is the daily chart of Gold (XAU=). Gold price has been rising along the red up-trend line for a few months, and just broke this trend line.

On the chart, we can see that the red solid up-trend line was a pretty strong one which successfully stopped Gold price from slumping below.

However, yesterday there was a large black candlestick breaking down the trend line, showing that the medium term bullish strong trend has come to an end and probably gold would undergo bearish trend in short term.

By using Fibonacci retracement, next support can be found at around 1,750 (38.2% retracement).

Indeed, MACD is at a pretty high level. Normally if it is at low levels, we might expect there will be at least a short rebound of the price. But this time it fits my anticipation that Gold price is going to slump further.

Orange line is the short-term resistant to the price, and next resistant level is at around 1,800.

FOMC meeting next week would definitely bring in some news to the markets, but we are not sure whether it is good news or bad news. So I think its better for us to lower exposures.

Pause in bullish trend (2011-09-15 DXY analysis)

Above is the daily chart of US Dollar Index (.DXY). This anti-euro index majorly consists of 58.6% Euro, 12.6% Yen, 11.9% Sterling and remaining percentage of Canadian dollar, Krona and Franc.

Especially after Franc was pegged with Euro, the feature of "anti-euro" would be slightly more obvious (Franc was only 3.6% of the index).

So on the chart, DXY broke out the green down-trend line last week, and started a bullish trend.

MACD and RSI both surged greatly, reaching a very high level which probably temporarily stops the index from going any further. DXY is more likely to consolidate a bit now.

I have added Bollinger Band with all typical settings as well. We can see that DXY tried to break out this highest line but failed, and two days ago it dropped below the highest line.

This tells us that the buying force wasn't so strong and that the USD is not yet strong enough to break higher. It is more likely that DXY would drop now.

Support is at around 76 given by both the 38.2% retracement and 10-day Simple Moving Average.

Upside is quite limited, with 77 being the next resistant (50% retracement).

Nevertheless, there is no doubt that the index is under strong bullish trend. So this is only a pause in the middle of the trend and the index would continue to rally.

Range bound (2011-09-14 VIX analysis)

Above is the daily chart of Volatility Index (.VIX). Yesterday when S&P 500 Index moved vigorously, the volatility jumped and broke the red short-term down-trend line.

However, at the end, VIX dropped below the line again and closed in between the red and green lines.

After being unable to break out, the index is more likely to slump to lower levels. Support is at around 29.5.

At 29.5, there is another support: 50-day Simple Moving Average. Though historically this average was not a very strong support/resistant, we could expect no break-down at this level.

VIX is likely to remain at the range of 29.5-40.5. This means that the index would keep on fluctuating, perhaps around 1-1.5% movements.

As Hang Seng Index usually follows the previous US markets, HSI is likely to move 200-300 points a day as well. Dropping over 800 points like that on Monday is less likely to appear again this week. And may happen next week when VIX is breaking out the red down-trend line again.

Bearish flag? (2011-09-13 HSI analysis)

Daily chart of Hang Seng Index (HSI):















As usual, the two red lines, one dotted and one solid, represent short-term resistant to the index.

The red solid line would resists the index at around 20,800, stopping HSI to surge any further. As we can see, the 50-day Simple Moving Average also acts as resistant.

This week I added one more for the downside support in green.

Last week, just after HSI having touched the green support, it rebounded and stopped at the middle of red and green lines.

It was due to the resistant force given by the 10-day Simple Moving Average. The index tried to break out but failed, and closed below 20-day SMA.

This week it seems to be more bearish trending. Hang Seng Index would probably retest the green support again at around 19,400.

What would happen if the index breaks below 19,400? Let's see the weekly chart.

Weekly chart of Hang Seng Index (HSI):















Its easier to check the support on weekly chart. The lower green line and the red line are the same as those on daily chart. And I have added one more parallel green line on the top.

This pattern looks familiar right? Yeah past 5 weeks HSI formed a flag while in a bearish trend. This shows a continuation of the bearish trend and would lead the index to very low level.

While we might confirm that the index would further plunge, we have to be careful of any potential rebound. Touching the lower green line at 19,450 is one of the reasons.

However, if this flag breaks (i.e. break down of 19,450), next support will be at 38.2% retracement at 18,800 and the Pitchfork at around 18,300. These two are major supports.

Then as I have said before, if these two break as well, it would mean a further 2,600 points slump. Again this would indicate an extremely serious things happening.

This week I expect the index to drop to 19,450 and rebound again. As there will be no extremely critical economic data to be announced, unless there is sudden breaking news, we could expect a stop from plunging below at 19,450.

Good luck.

Important Economic Data this week (2011-09-11)

13-September (Tuesday)
16:30 UK CPI (YoY) {Forecast: Slight increase from 4.4% to 4.5%}

14-September (Wednesday)
16:30 UK Jobless Claims Change {Forecast: Drop from 37.1K to 32.0K}
20:30 US Advance Retail Sales {Forecast: Drop from 0.5% to 0.2%}

15-September (Thursday)
05:00 Reserve Bank of New Zealand Rate Decision {Forecast: Unchanged at 2.50%}
15:30 Swiss National Bank Rate Decision {Forecast: Unchanged at 0%}
16:00 ECB Publishes Sept. Monthly Report
17:00 Euro-Zone CPI (YoY)
20:30 US CPI (YoY) {Forecast: Unchanged at 3.6%}

16-September (Friday)
21:55 US U. of Michigan Confidence {Forecast: Slight rise}

Wait for breakout (2011-09-09 GBP/USD analysis)

So 361 Degrees which I wrote yesterday morning surged over 4% yesterday, and technically it broke the resistant already. If it stays above the red line today, then break out could be confirmed and we should further BUY this stock.

Today let's see Forex.
















Above is the 4-Hour chart of GBP/USD. Since mid-August, sterling has been moving under downwards channel, pared the gains it got due to the extremely weak USD.

The pounds reached around 1.662 in mid-August, and plunged to around 1.591 this week, probably due to CHF pegging to EUR.

So what we could find on the chart is that the 20 Simple Moving Average was acting quite well to resist the price of sterling. GBP tried three times and failed to break out.

However, interestingly, this bullish force was getting stronger. In each trial, sterling was getting above the SMA more than that in previous trial. Though it still failed, I expect that it would be almost time for break out.

Secondly, 1.591 seems to be a very strong supporting level. The price retested this level just a short period after the first test in September, and this level still stood. This might indicate bottoming of GBP.

Thirdly, MACD and its EMA showed a bullish cross few hours ago. MACD has been sliding for long time and is currently at very low level. This cross might help MACD surge which signals boost of sterling as well.

So currently GBP is being resisted by the 10-SMA. What we have to do now is to wait until it breaks out again the 10-SMA (which should not be a problem), and we can LONG GBP.

20-SMA is the next resistant (at around 1.60). But as I predict break out of 20-SMA too, target should be 50-SMA instead (at around 1.614).

For the downside, break down of the previous low (1.591) would mean GBP continuing its bearish trend and would reach its previous low in July at 1.578.

Climbing and breakout? (2011-09-08 361 Degrees analysis)

Above is the daily chart of 361 Degrees (1361.HK). The group mainly focuses on manufacturing and sales of sporting goods.

After climbing as high as 8.10 in September 2010, the stock price just kept on sliding and reached as low as 2.91 in August 2011.

As shown on the chart, 361 Degrees was moving along the red down-trend line, and could not break this line. We can treat the line as a medium term resistant to the price.

Currently the stock price reached this line again. Starting from August 2011, this stock was boosting and showed a strong bullish trend. Could this short-term bullish trend lead the stock to undergo a medium term bullish trend?

The answer would be given shortly by the price. These few days we have to keep watching this and see whether it will break the red resistant or not.

If break out confirms, then the price would be up to around 5.64, which is 161.8% retracement level. This means around $1 profits.

First support is provided by the Pitchfork at around 4.26, and the next one would be 61.8% retracement level (which is around 3.95).

Consolidation of volatility (2011-09-07 VIX analysis)

Yesterday Hang Seng Index was well supported at the level of 19,300, and bounced greatly for around 400 points. What an interesting big V shape! So we still have to keep an eye on this level.

Daily chart of Volatility Index (.VIX):















Obviously, with such volatile markets last few days, the index jumped again and closed above all the shown Simple Moving Averages.

The red line and green line represent current short-term trend of the index. Both are moving downward.

Green line gives support to VIX at around 30 while red line resists the index at around 40. This is expected to be the range for VIX (i.e. 30-40).

Yet, MACD crossed its EMA from above last week, which was a bearish cross. And currently they are both plunging. We can anticipate that the VIX could hardly break the red resistant. Consolidation is more likely this time.

But, the index is still above 30. The stock markets won't just move sideways. It is expected that the equity markets would be fluctuating for 1-2% every trading day, so the volatility index won't get above 40 and below 30.

Changes would happen if VIX breaks either side.

Still bearish (2011-09-05 HSI analysis)

Last week the general stock markets' movements were quite hard to predict. Firstly, the market rose in the beginning of the week; and then, when people started thinking about buying, the indexes just plunged. HSI opened at 19,883 on Monday, boosted to as high as just below 21,000 on Thursday, and closed at 20,212 on Friday.

This week of course it would be an event or news-driven week. As shown in my previous thread, there would be 5 major rate decisions, several unemployment rates, CPI and GDP data coming out. Therefore, the stock market movements this week could be extremely volatile, especially when we expect that each news could bring huge influence on the markets.

While its hard to predict by forecasting all those economic data, technical analysis can help a lot. We can keep an eye on those critical levels.

Daily chart of Hang Seng Index (.HSI):

Apparently last week HSI once broke the middle line of Andrew's Pitchfork. On Thursday, the index touched the red down-trend line which appeared to be a strong resistant, and plunged.

On Friday, the index got back below the middle line. It seems like HSI still doesn't have enough power to break out.

Apart from the red down-trend line, the 50-day Simple Moving Average was another strong resistant too. This was shown with HSI opened at that level but was then pushed lower, and closed below the SMA.

The index will probably fill the gap on last Tuesday first, and may retreat lower. It still needs some more time to gain momentum for breaking above the resistances.

Weekly chart of Hang Seng Index (.HSI):

Weekly chart gives a clearer picture again. The resistant-force given by the red resistant line is the same as the daily chart (of course..).

However, we can see another interesting resistant: Pitchfork. The index tried to surge above the middle line of pitchfork, but obviously it failed and pare its gain and got back below the line.

I expect this week HSI would go down, given that the index had already tried so hard to break out last time. Bullish power gets weaker and bearish power would dominate this week.

So pitchfork is of course one of the most important levels to watch out. The lower line is currently at 18,400. There would be strong support at this point.

Before that, the short-term up-trend line which supported the two previous lows will give support at around 19,300. If this level breaks, HSI will drop to 18,400.

For the upside, the red up-trend line still gives vital resistant at the level of around 20,900. If the index breaks out, the previous gap in late July 2011 will probably be filled, and the next resistant level is at top line of Pitchfork: around 22,000.

Again, given such poor economic conditions worldwide, I carry pessimistic views on the coming economic data. My view is still bearish on the stock markets.

Important Economic Data this week (2011-09-04)

5-Sept (Monday)
17:00 Euro-Zone Retail Sales {Forecast: More negative}

6-Sept (Tuesday)
12:30 Reserve Bank of Australia Rate Decision {Forecast: Unchanged at 4.75%}
15:15 Switzerland CPI {Forecast: Lower}
17:00 Euro-Zone GDP (YoY) {Forecast: Unchanged}

7-Sept (Wednesday)
Bank of Japan Rate Decision {Forecast: Unchanged}
09:30 Australia GDP (YoY) {Forecast: Dropped}
09:30 Australia GDP (QoQ) {Forecast: From negative to positive}
21:00 Bank of Canada Rate Decision {Forecast: Unchanged at 1%}

8-Sept (Thursday)
09:30 Australia Unemployment Rate {Forecast: Unchanged}
13:45 Switzerland Unemployment Rate {Forecast: Unchanged}
19:00 Bank of England Rate Decision {Forecast: Unchanged at 0.50%}
19:45 European Central Bank Rate Decision {Forecast: Unchanged at 1.50%}

9-Sept (Friday)
07:50 Japany GDP (QoQ) {Forecast: More negative}
10:00 China CPI (YoY) {Forecast: Slight drop}
14:00 Germany CPI (YoY)
19:00 Canada Unemployment Rate {Forecast: Slight increase}

source: http://dailyfx.com

Two resistants (2011-09-01 DXY analysis)

Above is the daily chart of US Dollar Index (.DXY). We can see that the index just broke out the green down-trend line.

This might be due to the fact that European Financial Stability Facility is currently under pressure and it will take some time before any important decisions are made.

Back to the chart, after breaking out, the index will try to surge further.

I have identified two possible resistant-force providers:
The first one is the horizontal zone ranged from around 76.0 to 76.4. This area has been resisting the index for several times, and thus its power should not be underestimated.

The second resistant is the red up-trend line. This is relatively weaker than the resistant area mentioned above, but we have to be aware of the level 75.5 currently, and will reach the resistance area later on.

Therefore, I expect that the index will be continue moving upward, but it should be processing slowly. Then some day in Mid-September, the two resistant will meet and the selling force should be even larger.