Commercial Bank Plc - End of consolidation, heading upwards

Commercial Bank Plc is the largest private bank, and one of the 2 foreigners held counters, other being JKH. Also one of the largest market caps in the bourse. Therefore the strength or the weakness of it is important for the overall trend of the Market.

The Counter took a huge beating, whereby the price broke down from major support areas of 140 and 130 within the last 9 months. It fell to a bottom of 115.00. The recovery from there has taken it beyond 130.00 which was a support turned resistance point and moved upto the next major resistance point of 140.00, which was tested once so far. Since then the stock consolidated with a support at 134.50.

It is now trying to hammer past the 140.00 mark, if successful we can certainly see 146 to 150 in the short term. One of the strongest support lines is the 1000sma which is now at 134.20.

Seen Com Bank moving higher will help the ASI to extend its upward journey.

ASI - Trying to breakout of a major resistance level at 6550 points

For many weeks the ASI was rising with very thin margins. From 6254 points on the 4th of July it has come upto 6522.10 at the close of today's trading. That is an increase of 268.10 points in 28 days. An average rise of 9.57 points per day. This is not an aggressive move at all. At this rate we may not see the ASI hitting above 7000 points this side of September 2016. But an up trend even with very shallow steep is positive as a strong move can happen fast as long as the trend is in tact.

200 Day Moving Average

One of the interesting things right now is the 200 day moving average which is positioning as a strong resistance along with some trend lines coming from 2015 and early 2016, confluencing around 6550 level.

6529 to 6600 has many resistance points

Helping the 200sma to support the index is the 61.8% fib retracement of the previous down trend. Therefore we can safely assume that the 6500 points area is the present support. But in order to push the bulls higher we need to see a strong rally, that we have not seen so far. Else this slow and boring trend will prevail, leading to an ugly collapse.

Weekly and Monthly Charts are very encouraging

As you may know that for many months in this blog I've been reminding the readers that we will see new highs that will erase the previous all time high levels. I have not given up hopes on that premise.
This is now getting confirmed through the weekly MACD as well. The bullish signal it gave for many weeks have been successfully held thus far.

I will be over joyed when the monthly MACD gives the buy signal. We can see the monthly bars as shortening on the histogram giving some hope of that reality.

RSI is the darling of the Sri Lankans

Technicians do not go by just one indicator or oscillator, but in Sri Lanka you could just trade with the RSI. If you had bought when the RSI was below 20 points, you could easily make money when it hit past 80 points. Even though the RSI is a handy tool to understand the positive or negative divergence of the sentiments, in the Sri Lankan context it has a little significance.

Conclusion

As the medium to long term indications are now turning out to be bullish, I expect this to happen in the short term too, hopefully at a faster speed than we see now.

Happy to see that the ASI is trending

There were 17 market days in the month of July 2016. The ASI opened the month at 6254 points and closed at 6393 points. An increase of 139 points for the month. This is a move of 8 points per day. Which is much slower than the beginning of the month when it was trending more than 20 points per day.

The trend expanded a bit aggressively today the 1st of August '16. The leaders were mostly the heavy weights in the Market such as COMB, TJL, LLUB, JKH etc. Based on the momentum we could expect the market to gather strength and push forward the bulls a while longer.

It is encouraging to see that the 1000 day moving average is positioning as a major support level at present. Although the market is in an upper trajectory we need to see more strength and activity helping this.

 

ASI is poised to extend up - 10% Target Hit on Chou, and EMER trending, 5% thus far.

Only last week end did I post 2 trading ideas on CHOU and EMER. Within the week the CHOU target was hit (Buy -10.00/Sell - 11.20)  and EMER is remaining with an increase of 5%.

ASI finished the week higher than the high of last friday the 8th instant , closing at 6422 points. That was an increase of 56 points over that day's close. The index had edged up 168 points since the 4th of this month, which means that it had gone up 21 points on average per day. We have another 9 market days to go during the month, and if this momentum persist then it will add 189 points more to end with an increase of 357 points. This momentum as against the earlier up move between 10th March 2016 and 16th May 2016 is a little bit too fast. That trend brought in 846 points at an average increase of 19.67 points whilst now it is averaging 21 points. In my earlier posts too I mentioned that the speed when the index was heading North is too fast as against the pace it fell in this present rally started on the 10th of March 2016. If this speed continue we will see the Market ending the Month of July at 6611 points. Another unique feature in this trend is that even a novice of elliot wave counting (like me) could be confident on the formation. As such my personal opinion is that we have resumed the 3rd wave. The 2nd corrective wave nicely retraced a little more than 50% of the 1st wave which was something RARE in the recent past. Then as I mentioned in my last week's post the index crossed above the 1000 sma as well. Another moving average line I'm interested in seen breaking is the 200 sma on the weekly chart. This could be broken perhaps within the next week as it is at 6473 points. Another 51 points more.

Weekly RSI in 2016 came down below 20 points for the 1st time since 2008. This shows how low the sentiment is amongst the market players. However this is great news for the ones who cherish riding the waves.

Many are still wondering of a down fall. That is natural at this stage of the trend, pessimism is so very high. But if someone noticed how the market behaved last week, it goes on to show that the market has many opportunities.

Eastern Merchants - 10% in 2 weeks, else exit.

Eastern Merchants (EMER.N.0000) - Price broke out of the near term resistance of 7.00, also was successful in trading above the 9sma, whilst the stochastic signal line went above, except for the macd still remaining below the zero line. This looks a potential 10% trade as such buy at 7.00, to sell at 7.90, while the stop must be at 6.70, or 2 weeks which ever is 1st.

Please note that this is purely a trading strategy and a minimum holding period of 2 weeks nothing more. You must close the trade on the last day of the 2nd week or at the stop prices given above. As such buy only an amount that you can bare, and preserve your capital. OTHERWISE PLEASE DO NOT BUY. IF YOU DO NOT PRACTICE DISCIPLINE WHEN TRADING YOU ARE NOT FIT TO DO SO.  

Short Term potential 10% returns - Maximum Holding period - 2 weeks

With the momentum build up in the market from the 5th instant, we see many short term trading opportunities PURELY FROM A TECHNICAL TRADING PERSPECTIVE.

The Rules are i. Buy on 2 or more of the following happen - Price, macd, 9sma, and stochastic breakout. ii. Sell at a 10% target. iii. Stop if the stock comes down by 5% or in 2 weeks, which ever happens 1st.

CHOU - Price Broke out of the previous side way channel. Stochastic signal line is above, broke out of 9sma, and the macd gave the 1st histogram line above 0. Signal is looking very bullish. Therefore buy at 9.80. Sell at 11.10 which will give a 10% return after cost. Stop at 9.30 or in 2 weeks, which ever happens 1st. As the stock has a strong buy signal, you may buy at 10.00 as well, to Sell at 11.30, and Stop at 9.50, or 2 weeks which ever happens 1st.

Please note that this is purely a trading strategy and a minimum holding period of 2 weeks nothing more. You must close the trade on the last day of the 2nd week or at the stop prices given above. As such buy only an amount that you can bare, and preserve your capital. OTHERWISE PLEASE DO NOT BUY. IF YOU DO NOT PRACTICE DISCIPLINE WHEN TRADING YOU ARE NOT FIT TO DO SO.   

Present Prices are so attractive - DO NOT IGNORE

Relative Strength Index in September of 2008 was heavily oversold at around 6.9 points and the ASI was around 2100 points. Thereafter the RSI was rising although the ASI kept on falling making it a positive divergence. This was an indication that the selling momentum in the market was receding, although the sentiment of the market was negative. Ultimately the Market re-wrote the history by propelling it to new record highs. Ever since then the RSI never fell below 15 points till 2015 when it happened once, as it came down to around 14 points. But in 2016 the RSI fell below 12 points on 2 occasions, indicating the pessimism amongst the Sellers, stemming from factors in and out of the Country. An oversold market is bad for the Sellers but never for the Buyers. Since the lows in the RSI we now can see that the level of Selling pressure is not as great, but it did check the levels below 20 points on the RSI. One good indication for me is that the trend of the RSI is in the same direction as the ASI. Thus we do not see any negative or positive divergence just yet. The biggest draw back is the pessimism and fear psychosis prevalent in and out of the Country. Unfortunately the actions that are taking place inside the Country are rather unfortunate for the direction of the market and is confusing all the stakeholders of the Country. But this negative scenario in the Market is benefiting the Long Term Investors and a few individuals, which is the Minority just like a Minority in the Society of the Country is reaping benefits due to the present state of affairs. 

Present indication is encouraging as the oversold effect is not as big as what we saw a few months ago.

 

1000 day Moving Average

One of my personal indicators for the CSE is the 1000 day moving average. As you know the 1000 sma is the average value taken by dividing the closing values for the last 1000 days. WE ARE TRADING IN AND AROUND THIS LEVEL. I see this as a major game changer for the market when it pierce through up or down. As can be seen in the following chart the ASI did break down through the 1000sma on the 27th of June 2016, but broke out convincingly yesterday the 8th of July 2016. That for me is a bullish signal. ASI tried to break down the 1000sma at 6262 on 20.01.2016,but got supported and the ASI moved up about 200 points. Again the ASI came down and pierced through 1000sma at 6264 points on the 15.02.2016. This time it could not hold, and nose dived to 5862 points. Drop of 402 points from the 1000sma. On the 12th of April the it broke out of the 1000sma at 6280 points and went upto 6708 points till the 16th of May 2016. On 27.06.2016 the ASI broke down at 6335 points, BUT dropped only to 6254 points. That was 81 points only. Which means that the latest recovery was not bigger than the previous. Now that is another bullish signal to me.

I know you may not have time to read further. But I value your interest in reading it up to this far.
There are many more indicators that are suggesting that the MARKET is going to go NORTHWARDS. I will cover them in the next few days. PLEASE DO NOT IGNORE THE MARKET. IT IS CALLING OUT LOUD FOR YOU TO INVEST AS THE PRESENT PRICES ARE GIVING YOU MANY BARGAINS.