SOUTH ASIA CHARTSPEAK ISSUE 4 MARCH 2015 ISSUE 5, MAR 2015

Transcription

1 ISSUE 4 MARCH 2015

2 CONTENTS FX Technical outlook Pg USDINR Bias is for USD weakness till 63 holds 1 EURUSD Thrust is terminal; 1.07 is major support 2 GBPUSD Approaching the critical area 3 USDJPY Triangle breakout targets the Dec high 4 AUDUSD Major L-T support lies at USDCAD Break of validates bullish triangle 6 DXY Daily RSI negatively diverging with price 7 Equity Technical outlook Pg Nifty 8669 is major support on the downside 8 Colombo 7000 remains critical bull-bear pivot 9 BSE Midcaps M-T trend intact until holds 10 Dhaka At Bearish Head & Shoulders neckline 11 Commodities and Rates Technical outlook India 10 yr Risk of breaking 7.62 with 7.78 holding 12 US 10 yr Trend is up as long as prices hold Gold Market vulnerable for a test of Silver Bias is weak as long as is holding 15 WTI Break of Feb's inside bar will dictate bias 16 Brent Previous 4 th wave at 54 is major support 17 Gasoline Bias is bullish as long as holds 18 NatGas Break of to encourage bulls 19 Heating Oil Correction expected to test support at Bursa Palm Oil 2216 is major support for the bull case 21 CBOT Soya Bearish until daily lag line breaks Copper Close below 5725 with 5960 intact is bearish 23 Pg S-T = Short term, M-T = Medium term, L-T = Long term Prices are as of 3:45 PM on the 9 th of Mar 2015

3 USDINR (62.70): Major resistance lies at followed by the critical 63 level; any break of this will target 64. Failure of the Head and Shoulders on the daily chart means the USD will head towards the area, which is major resistance is also crucial from a Fibonacci perspective as it is the 61.8% retracement of the fall from to Any break of should then target 63 this is crucial for the likely impulse as a break would invalidate the bearish USD bias. However, if holds and the market breaks below 62.38, this would increase the odds that the USD will see lower levels. On the downside, immediate support is at ; below this supports lie at

4 EURUSD (1.0892): Thrust out of a contracting triangle means the downside move is reaching a termination area. Recovery since the lows of traced out a 4 th wave contracting triangle, which means the current downside thrust is terminal. Monthly RSI at 23 is the lowest ever since the launch of the Euro, while support from a L-T monthly trendline is at Assuming that the entire consolidation between 2008 & 2014 was a running triangle in wave (B), wave (A) = wave (C) at Immediate support is at 88.6% of wave (A) deducted from the wave (B) high at while critical resistance is at is where leading span 2 flat-lined on the quarterly chart in 2001, so the zone is key support from here.

5 GBP (1.5108): Negative reversal on the daily chart reinforces the bearish trend; major support lies in the area. On the daily cloud chart, the conversion line is looking to cut the base line from above this will reinforce the bearish trend. Notice the lower high in price with the higher high in the RSI on the dailies - this is a negative reversal, which is bearish for prices. Immediate support on the Point and Figure chart (50 pips x 3) is at 1.50; any print of will generate a compound sell signal. Next immediate support will be the area; any break will then target L-T support at and Immediate resistances lie in the zone followed by critical resistance at

6 JPY (120.76): Thrust out of a bullish contracting triangle targets the Dec 14 highs, with the possibility of more upsides. As expected, the market has thrust higher out of the long contracting triangle; first target is the Dec'14 high. Given that triangles as per the wave theory occur in the last but one move for the prevailing trend, this thrust higher will be terminal. Break of the Dec high will target ; all of these targets are valid as long as holds. Notice that the daily RSI has generated an Inverted Head and Shoulders breakout with a break above the falling neckline. Measured objective based on the triangle breakout targets which clusters closely with Fibonacci resistance.

7 AUD (0.7737): Rising channel on the dailies suggests downside risk; crucial support in the area. Rising channel in a downtrend on the dailies Bearish once the lower channel line is broken. Current week's bar has closed under the lowest low from 2 weeks ago, making last week's high of immediate resistance is critical support on the monthly cloud chart representing a turn area for leading span 1 in July This clusters closely with the lower line of a falling channel on the monthlies which crosses price this month at On the 50 pips x 3 Point & Figure chart, immediate support lies in the area; any print below will test

8 CAD (1.2594): Break of the Feb high at will validate the bullish contracting triangle with within sight. Possible bullish contracting triangle on the daily, which will be confirmed on a break of the 02/24 high at (black dashed). In such a scenario, the widest part of the triangle added to the breakout point provides an approximate target of First target on a break of is which is the 200% Fibonacci extension of the Sept'13 to Mar'14 rally. In case is intact from current levels, first support will be ; major support on a closing basis lies at Monthly Inside bar in Feb (red oval); any break of in March with holding will increase the odds for a rally to

9 Dollar Index (97.38): Negative RSI divergence on the daily suggests dollar bulls need to exercise caution. On the dailies, the recent thrust higher is from a contracting triangle - this means the market's rally is approaching a terminus point. Note the negative divergence between the RSI and price - suggests that some sort of a 5 th wave peak is ahead of us. From a Fibonacci standpoint, important resistances to monitor for the termination of the current move are On the quarterly cloud chart, the lagging span line will face resistance from a flat-lining cloud extreme at 99.63, which is crucial. 96 is a key bull-bear pivot for DXY bulls who are targeting higher levels; any break under this will reverse the M-T uptrend.

10 CNX Nifty (8756): Rising wedge on the chart of the NIFTY suggests caution, with the risk of breaking lower rising. Market is tracing out a rising wedge & today s price action has broken underneath the lower wedge support line; 8669 is major support. Break of 8669 would end the S-T uptrend; the M-T trend will be up as long as the critical 8470 low is intact on the downside. Note that as long as the lagging span does not break below the daily cloud, the trend will be considered to be on the upside. The Alternate count, which is bullish, suggests that unless the market drops under 8364, the L-T trend will remain bullish. In case the market holds 8669 and rallies, immediate resistance will be at 9008 followed by

11 Colombo All-Share (7136): As long as the weekly hammer low at 7000 is intact, the uptrend is expected to resume. Market held crucial support at 7000, and rallied 5% before backing off from the top of the gap area at First Double-bottom sell signal will be triggered on a break of 7000; this represents L-T support on the 70 x 3 Point & Figure chart. The test of 7000 also created a weekly hammer, so any break of this level will represent a shift of sentiment from bulls to bears. Immediate resistance lies at 7266, with more crucial resistance coming in at the weekly conversion-base line cluster at In case the S-T downtrend persists (notice the falling 45 degree resistance lines), supports lie at

12 BSEMDCAP (10901): Momentum loss on the daily, but L-T uptrend active until the lagging span is above the cloud. On the dailies, there is a rising wedge forming in a rising market with negative RSI divergence; momentum is not following price. Any break of the lower wedge line may force existing longs out of the market, but bears will be encouraged only under Crucial resistance is at if the market falls under with this level intact, there will be immediate weakness. Consequently, if breaks, then bears will attempt to push the lagging span under the daily cloud - this will be crucial if it happens. On the contrary, if the market is able to hold & rallies above 11109, expect a break of 11180, followed by a test of

13 DSE 30 (1714): Resting on a critical Head and Shoulders neckline; any break should bring L-T support at1560 in play. Note that the decline over the last month has brought prices to support from the upper line of the weekly Ichimoku cloud. Also, there is a bearish Head and Shoulders pattern on the dailies, and price is currently resting at the crucial neckline. If the neckline breaks, the measured objective targets 1336 in the L-T as long as the right shoulder high of 1819 is intact. Notice that the daily chart has a falling channel, whose upper line should act as resistance as the downtrend extends. Immediate support on the downside is 1686, followed by the critical area; 1590 is a multi-pivot support level.

14 GIND10YR (7.73): Reverse Head and Shoulders forming on the daily; holding above 7.64 and breaking neckline critical. Notice that a Bullish Head and Shoulders is panning out on the daily chart, but this will be validated only on a break of the neckline. Daily RSI continues to diverge positively with price, which reinforces the view that the bulk of the downtrend is already behind us. Immediate resistances lie at ; any break of 7.90 would target major resistance at An idealized target on a break of 7.62 is 7.45, but this downside target remains attainable only as long as 7.83 is intact on the upside. S-T supports from current levels come into play at , but 7.62 remains the first hurdle to clear on the downside.

15 US 10yr (2.2272): Market resting at an important cluster of resistance, but as long as 1.90 is intact, the M-T trend is up. On the Point and Figure chart (0.05 x 3), the market is right at resistance from a trendline and the highest X from a prior c olumn of Xs. Wave structure suggests that the market has rallied impulsively and may be nearing completion - short term pullback is likely. Immediate resistance is at , but as long as 1.90 is intact on the downside, the market has the potential to test On the daily chart, the Inverse Head & Shoulders breakout has been validated with a target of 2.70, making this a crucial pivot. This breakout will remain valid as long as the market is above the right shoulder low at , with immediate support at

16 Spot Gold (1173): With 1252 is intact from current levels, the threat of breaking below the Nov 14 lows of 1131 is high. On the 10 x 3 Point and Figure chart, the market is at support from the previous column of Os; print of 1160 will break this support. Once the double - bottom sell signal is generated, immediate resistance will be 1190, a level that bears will try to protect. Notice that the weekly RSI has been unable to get past bear market resistance (magenta zone) keeping the market under pressur e. Monthly RSI continues to trade at bull market support (green zone), with the falling channel lows coming into play at 1100 in March. Immediate supports lie at ; immediate resistances above 1190 are 1237 and the crucial 1252 area.

17 Spot Silver (15.96): Monthly RSI is holding bull market support, but M-T trend will be down until is holding. On the monthly chart, the market has backed off from an area of major support that on the way up became resistance. Monthly RSI is holding onto to bull market support (green zone), but the wave structure suggests a retest of and lower. On the 1% x 3 Point & Figure chart, targets on the downside are at and a vertical count target of Immediate resistance for the market from current levels will be the daily flat-lining cloud extreme at followed by Any break of resistance at will bring the next set of resistance between and in play - push above this is critical.

18 WTI Crude (49.54): Feb s Inside bar will decide the next directional move, but is the key on a closing basis. Monthly chart generated an "Inside Bar" in February; a break of the Feb high or the Feb low in March will dictate the next directional play. Recent consolidation on the daily points to a likely contracting triangle - unless breaks, and are possible targets. Confirmation of the bullish contracting triangle having occurred will be when the market holds and breaks on the upside. Immediate resistance lies at followed by 55.47, while support lies at under this and come into play. Any close below in March will break the long term trendline originating in 1998 and drawn through the 2009 lows.

19 Brent Crude (59.04): 3-wave correction expected towards 54, but impulsive structure suggests bias remains higher. Daily RSI is struggling at bear market resistance (magenta); immediate support lies at with major support lying at From a wave theory perspective, Brent is likely to outperform WTI as the nature of the recovery seems to have an impulsive look to it. Since 5-wave impulses can't stand in isolation, any test of area will encourage bulls to play for the next leg higher. If the market resumes its rally post a dip to 54, upside targets are 65 and valid until is intact on the downside. In the event that prices drop underneath 53.90, supports come in at and 51.98, which is 61.8% of the rally from to 63.

20 ICE Gasoil (575): S-T pullback expected towards 557, but the M-T trend looks encouraging for the bulls towards 641. Clear 5 wave impulse looks complete at the high; a 3 wave pullback is now expected - first support is at 557. This view is reinforced on the daily cloud chart, where the recent rally has run into resistance exactly at the upper cloud extreme. In case the correction extends below 557, next line of supports are at 542 and this is the prior wave (4) major low will be important on the downside as the former represents the 61.8% retracement of the entire recovery from 453 to 601. If the market rallies and breaks above 601, major resistance lies immediately ahead at any close above this targets 641.

21 Natural Gas (2.739): Bears will be looking to protect ; break will validate a bullish Head & Shoulders breakout. Last month we failed to break major support at 2.42; this is encouraging but bulls will be excited only on a print above If the market achieves , an immediate bearish running triangle will be invalidated - the next target will then be Notice that the monthly RSI is holding onto bull market support (green zone), but a major resistance to overcome in the L-T is Possible Inverse Head and Shoulders on the daily; if the market closes above in the coming week, the setup will be validated. The right shoulder low of will then become the key; under which supports will be 2.42 followed by and

22 Heating Oil (185.47): S-T decline expected into the area; close underneath 168 in March will be bearish. g Weekly chart has generated a key pivot high; this week a close under with holding will suggest a deeper pullback is due. Correction is expected as the initial 5 wave impulse is also complete at ; likely area for a downside test is 177 followed by 172. Since no impulse can stand in isolation, any visit into the 172 area will encourage the bulls for a target of and 214. These upside targets will only be valid as long as the major low at holds - any break of this will target 147. Any close below 168 this month will mean the L-T trendline drawn from the 2002 through the 2009 lows would have been broken.

23 Bursa Palm Oil (2269): Thrust out of a triangle which is bullish, but 2216 is critical support for the rally to extend. Entire consolidation since the Nov'14 to the Feb'15 lows is a running triangle, which has resulted in a thrust higher to As long as the more recent low at 2216 holds, the market has the potential to target on the upside. Immediate supports for the decline since the thrust high at 2400 are 2256 and 2237; this zone should hold if a rally is due. In case the market holds 2400 and breaks below 2216, the implications will be bearish in the M-T. Declines in such a case would have the potential to target and major support at 2064.

24 CBOT Soya (31.27): Lagging span failure to break the daily cloud suggests weakness, with the RSI also struggling. On the daily cloud chart, the inability of the lagging span to break above cloud resistance at is bearish, despite the price break. Notice that the daily RSI has failed to break above bear market resistance (magenta) on the last 4 occasions, so the bias is weak. Immediate resistance for the markets from current levels is followed by the previous 4 th wave high of which is critical. On the downside, immediate supports lie at ; any print below will increase the odds of making new lows. If the market is able to hold and rally beyond 33.58, the next target on the upside will be

25 LME Copper (5745): Break of S-T trendline indicates weakness; as long as 5960 holds, weakness likely to persist. Dailies have fallen below S-T trendline support; pivot high at 5879 above the trendline (just before the break) is immediate resistance. Notice on the daily chart that the RSI's recovery stalled exactly at bear market resistance (magenta); as long as this holds, bias is weak. The rally to the recent high at 5960 is a result of a thrust out of a contracting triangle; this is key resistance bears will want to defend. Immediate support on the downside is below this the market will look vulnerable for a test of 5580 and Any close below the prior week's low of 5725 with 5960 holding will be a bearish configuration, since the daily cloud chart is bearish.

26 NOTES: Relative Strength Index, (RSI on Bloomberg), is a momentum oscillator that defines the speed of price moves. The calculation behind the RSI makes the indicator oscillate with a floor at zero and a cap at 100. Although traditionally, readings of 70 and 30 have been considered Overbought and Oversold, subsequent research has revealed that the RSI behaves differently in Bull and Bear markets. Bull market resistance is defined between 80 and 85 (Red zone), Bull market support falls between and 40 (Green zone), Bear market resistance is between 60 and (Magenta zone) and Bear market support lies between 20 and 25 (Blue zone). Ichimoku cloud (GOC on Bloomberg) charts are a Japanese trend following technique. The system uses five lines to assess the bias in a trend. These are: Conversion line which is the midpoint of the 9 bar highest high and lowest low (Magenta) Base line which is the 26 bar highest high and lowest low midpoint (Orange) Lagging span, which is the current price pushed back 26 periods (Black) Leading Span 1, which is the sum of the conversion line and base line pushed forward 26 periods (Dark Green) Leading Span 2, the sum of the highest high and lowest low for the last 52 sessions, pushed forward 26 bars (Red) Point and Figure (PFP on Bloomberg) is a data style and a technique that is both time and volume independent, and therefore, records pure price action. Price movements are recorded in columns of Xs (rising prices) and Os (falling prices). These charts are known in terms of two parameters - box size and reversals. The box size refers to the value of each X and O, while the reversal size represents the minimum value that the price should reverse by to change the type of column. The most popular reversal size is 3, with the box size also user defined. When the box size and/or reversal size is reduced, the chart becomes more sensitive by displaying more columns and vice versa. The most basic buy signal on a Point and Figure chart occurs when the current column of Xs goes above the highest X in the immediately previous column of Xs, and is called a "Double Top Buy" signal. A "Double Bottom Sell" signal occurs when the current column of Os goes beneath the immediately previous O.

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