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.

My Position

Sorry it has being a while,I am extremely busy,I believe I would be able to resurrect this blog.
I will like to share my present positions with you and a postion I am planning to take this morning when the market opens.

Recently I bought UNHOMES and STDINSURE and I am buying AFRIBANK today because price is at support,am sorry I can give the detailed analysis but I will do that as the blog grows.I looking at 2 weeks to 2months horizon depending on market conditions.

Humble Regards.