2014 Outlook and analysis

For H1 2014, I expect a positive outlook for the equities market due to expected release of full year results with corporate actions and the msci rebalancing coming on stream, this should boost foreign participation in this market. I have a muted sentiments towards banking, i prefer the non banking stocks.


One of the technical strategies I will be looking at for 2014, its called the Pivot strategy, you can google this up, i have also set the price target i will be looking at for the top 40 stocks. I have attached the sheet in pdf (see link: http://www.stockmarketnigeria.com/forums/nigerian-stock-exchange/2991-technical-analysis-edge.html#post196308). I have sorted the securities based on the highest to lowest expected return, this securities will be my analysis framework for 2014 except i get a request to analyse specific securities.

Please send me an email should you require further clarification.

Thank you

I have attached a First bank Chart, to illustrate some basic concepts,the chart is a 8 months chart and from that chart we can see that in the last 5 months we have being in an uptrend, as described by the Andrew median line or the channel.

We should not forget that when we have uptrends like this we also have mini- pullbacks, waiting for these will help us to time our entry and make us take trades with high probability of success.

Also note that each securities has its own cycle, understanding this will also be an added advantage.

How to trade:

Going forward i will be willing to buy half of my position at 15 naira and load the other half at the lower end of the trend-line which is the open of the year depending on market condition.

A break above the upper trend-line which i envisage will happen will signal another set of upward movement.

Below are the monthly levels i was looking at for February:

R3 18.94
R2 17.57
R1 16.36
Pivot 14.99
S1 13.78
S2 12.41
S3 11.2

Market is currently trading around the monthly Pivot, one of the reasons am buying. I will update as deem fit.

Thank you.

Typical example

Looking at the price chart above,the chart is a 6-month sterling bank,there are two horizontal lines drawn on the chart,the first resistance linewas broken mid-january 2010 and price has not retraced to this level,but the second resistance line was broken mid-february and it is being tested the fourth time,see how prices kept bouncing off this point,this line is resistance turned support.this is a very good illustration.

Pricinple of Price movement

Principle of price movement

I will like to talk about what I believe is one of the foundations of Technical analysis, it is key to understanding technical analysis, which is how price moves, this principle is universal it can be applied in any market, but it does not always happen but it occurs frequently, but with skill and experience you will be able to master it.

Price moves vertically then diagonally or horizontally after which you can expect a Continuation or Reversal. Vertical moves define trend. Diagonal moves continue with the momentum. Horizontal moves consolidate the conquest.

As price moves it will hit a ceiling (resistance) or a floor (support) which it can not penetrate with ease. At these levels you will see on your charts turning points in the price. When the price penetrates these levels we have a breakout. When we have a breakout of the resistance level the price will initially accelerate away from it very quickly. It should then make a parabola type u-turn and retest the resistance level which now acts as support and vice versa. Illustration below.

This formation is something that will take place over several candles/days. Sometimes the parabola forms a hook, which will require a different approach, see illustration below.

Sometimes it fails or doesn’t break the support/resistance totally and the support/resistance looses significance, see illustration below.

If you understand this basic concept, then what is required is skill and experience in playing them. In subsequent post I will be drawing up illustrations to further buttress this point.

Opportunities......

The time has come for massive buying opportunities in the NSE,this kind of opportunities present itself last 6-7months ago,my recommendations are listed below as usual based on technicals
-Firstbank
-Diamond
-fidelity
-intercontinental
-Ibtc

N.B. trade at your own risk,but such opportunities can return 50% in 6months

More to come.....

Update and Positions

Guess you all had a nice weekend,I will like to update my position on the NSE index(Nigeria Stock exchange) and also tell you about my positions.

Firstly I will like to talk about my positions,I am presently in Fidelity,Gt-assurance,Oceanic and

Platinum and am thinking of holding them for some time.On the index we are gradually approaching 30,000 where our W-formation will be completed.And i expect the index to close higher on Monday.

I have attached a chart of the index for illustration.

My pick for the week ahead is Sterling bank,looking at first-inland.

NSE FORECAST

In my technical analysis of securities,I usually do a top down or bottom up analysis based on market conditions,but I will do a top-down analysis now.

Looking at the NSE index I can say that the market is about resuming the up-trend,don't let us forget that the crash of the market was just a major retracement of the long term uptrend.

Reasons why I believe it is resuming up-trend:

-Formation of the W-formation(also called double bottom) which is a significant reversal pattern,I have highlighted it in the chart attached

-Since the index touched 20,000 as earlier said,subsequent swing lows has been higher(higher lows)

Targets:

-Confirmation of resumed up-trend is when the index is able to break 30,000.When it breaks 30,000 it will retrace before moving higher.

Please note:It will not be an easy ride the second bottom might be extended,but this is how it will look like when looking at the big picture,this analysis is for long term investment horizon,but we should get to 30,000 before the year runs out.


As earlier said,UNHOMES and AFRIBANK are very good stocks to buy now.






Humble regards.