1. STOCK CALL
JAZIRA SECURITIES BROKERAGE Tuesday, November 15, 2011
EGX30 RIC: .EGX30
THOROUGH PRICE AND MOMENTUM ANALYSIS
It’s always helpful to start any chart analysis with a pure
look to a “pure price action”, and then add whatever you
want to chart in order to complete your “weight-of-
evidence” approach. We’ll begin with a thorough investiga-
tion to the price action using classic chart techniques, and
then we’ll turn our attention to Momentum Analysis; we’ll
look at the RSI and MACD indicators from completely dif-
ferent side of view.
The upper blue declining resistance line in a falling major
channel connects two swing highs; the tip of the famous
2008 H&S topping pattern and the third swing high in a
wide lateral action (upper rectangle). The lower line is just
the most important declining support line in the chart. It
gains such important from its degree of steepness and also
from being tested more than ten times!!
The index has fulfilled the minimum targets of both rectan-
gles, found a confluence of support from two different de-
gree of trend lines; the mentioned major declining support
line and the slightly steep, short-term, declining dark blue
trend line, held firm over the major support level; March
2009 bottom, and thrust violently to the opposite side of the
falling channel, successfully penetrated the intermediate
declining trend line, and after a handful of bullish sessions,
the index started to level off showing a characteristics of a
possible bottom formation.
Continue...
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2. STOCK CALL
JAZIRA SECURITIES BROKERAGE Tuesday, November 15, 2011
EGX30 RIC: .EGX30
Continued…
As the RSI is very helpful in Range Analysis, it offers one of the most important signals in
Trend Determination approach as it fly in different ranges in compliance with the price’s
trends. The Bull Range (blue lines) defined the mid-2006/2007 bull market. As the index
was heading to the tip of the Head in 2008 H&S topping pattern, the RSI failed to contin-
ue all the way up to the upper bull resistance line, giving an early signal of a possible dete-
rioration before a plain decisive down-breakout in June 19, 2008 take place. The Bear
Range (red lines) defined the 2008 bear market. A failure to test the bearish support line
has followed by a thrust over a bearish resistance line giving again an early signal of pos-
sible stellar advance. While the index was oscillating in a wide lateral action, the RSI also
was oscillating in a range between bull and bear ranges (green lines). The right side of the
chart shows how the RSI is resting well over a bearish red support line indicating that a
continuation of a bear market, under current circumstances, isn't a possible scenario. How-
ever, we still need a thrust to either a sideway range resistance line or a bull range re-
sistance to be able to announce that; “given a worst scenario, the index will continue to
trend laterally”. A multiple positive divergences has followed by a decisive up-breakout
over a declining trend line in the RSI. So far, it seems that the indicator is just pulling
back to the breakout level.
The MACD form mid-2009 till now is taking a bearish status, falling in a well structured
declining channel. While the index begun a second round of a decline, the MACD refused
to continue all the way down to the lower declining support line, formed a small double
bottom pattern and successfully penetrated its neckline. This “Partial decline” signal may
give an early signal that the MACD will take out this falling channel heading to the clear
zone. “Taking out the declining resistance line in the MACD indicator considers a major
change in the structure and will force the index to still higher prices”.
BOTTOM LINE: (Last Price: 4,177 pt.) Taking out a slanting declining line (thick
brown line) in the price chart (4,400/4460) signals a beginning of a sustainable rally to at least
5,800. So far, we’re bullish on the market and don't mind an Accumulation strategy at current lev-
els or even slightly lower, but however, we’ll be “extremely bearish” if the index made its mind to
threaten the mentioned moving support line (below 3,800). For the conservative investors
(((favorable))), you are advised to pick up from a long side-buying strongly with your both hands–
after a decisive up-breakout over 4,460.
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3. STOCK CALL
JAZIRA SECURITIES BROKERAGE Tuesday, November 15, 2011
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