Technical Analysis to Start 2009
As I am working on building my portfolio of 30 stocks, I want to give you a reason to be bullish on equities for the beginning of 2009. I would describe myself as a Portfolio Manager with a Top-Down approach with some stock picking ideas based on GARP (Growth At Reasonable Price). However, my years at Refco Trading Services are still weighing on me and I am also very much looking at Technical Analysis to find entry and exit points for stocks.
I believe it is important for me to show you, before you start looking at my portfolio, why for the next couple weeks I see a rebound in equity markets that could bring us to 1050 on the S&P500 and about 10000 on the Nikkei 225. In the charts below you will find that first the Nikkei has been faster to rebound than the S&P500 or the CAC40. However, today, graphically the S&P500 and the CAC40 are looking for a stronger rebound in the next couple weeks. Both indexes jumped above their MM50 today. Both move are very sharp, which indicates that the movement is just begining. On top of that when you look at the technical indicators, you can see that the MACD is about to turn positive, the RSI and the Stochastics are on the upside without being overbought. When looking at the weekly charts, wich gives a long term view of the market's direction, it is even more bullish as both the MACD and Stochastics just crossed on the upside. The only concern I have is the low volume of the past couple days, which show that there might be only few sellers in the market and, therefore explain the sharp upward move.
On the other hand the Nikkei is already well passed its MM50 and the MACD is already positive. The Stochastic looks overbought while the RSI is still rising but well the 30 level. However, the weekly chart is giving us a more bullish picture as its MACD and Stochastics crossed on the upside couple weeks ago and are still moving up, which indicates that the upward move is not finished yet. As you can see on the Nikkei225 chart, the main resistance of the bearish trends is well off the high of today and should give some breathing air to Bull investors and Traders in the next couple weeks.
It is off course just a simple example on how I look at charts when making a investment decision. I would emphasize that it is very important not only to look at daily charts but also weekly and monthly charts. The daily chart helps you to enter a stock quickly but only weekly and monthly chart can provide you with enough insurance that the upside or downside is here for a long time. In the recent months, many investros got trapped into false upward move that only lasted a day or two. If they had looked at a weekly chart they would have been able to stay away those stocks.
See you next time with my 30 stock portfolio ...
