Thursday, February 18, 2010

Technical Outlook for Emerging Markets as at Feb 18, 2010

The question on everyone's mind is whether this is the right time to buy stocks again? I will look at the main barometer for Brazil, Russia & India, which make up 3 of the countries referred to as BRIC. The third country, China is excluded as its main stock market, Shanghai Stock Exchange has been closed since Feb 12.

1. Brazil

The Brazil's Bovespa Index (BVSP) has rebounded above its short-term downtrend line. Its 20-day SMA line has cut below the 50-day SMA line but not the 100-day SMA line, which is still rising. BVSP, which closed at 67695 yesterday, is still below its medium-term uptrend line support at 69000. Go to the earlier post (here).

Based on the mixed technical reading, I expect BVSP to trade sideway.


Chart 1: BVSP's daily chart as at 17/2/2010 (Source: Stockcharts.com)

2. Russia

While Russia's RTSI's 50-day SMA line is already flattening out, the 100-day SMA line is still rising. The 20-day SMA line has yet to cut below the 50-day & 100-day SMA lines. Despite the relatively better technical reading, RTSI has yet to break above its short-term downtrend line, with resistance at 1470. The weak rebound may be due to its close proximity to the region with serious sovereign risks concern, i.e. Europe. In addition, it is noted that RTSI, which closed at 1422 yesterday, is still below its medium-term uptrend line support at 1490.

Based on the mixed technical reading, I expect RTSI to trade sideway.


Chart 2: RTSI's daily chart as at 17/2/2010 (Source: Stockcharts.com)

3. India

The Bombay's BSE has rebounded above its short-term downtrend line. Nevertheless, the 100-day SMA line flattening out and the 20-day SMA line has cut below both the 50-day & 100-day SMA lines. BSE, like Hong Kong's HSI, seems like a rounding top. The best indicator to use to chart this type of market is multiple moving average lines, which has turned bearish.

Based on the mixed technical reading, I expect BSE to trade sideway, with a downward bias.


Chart 3: BSE's daily chart as at 17/2/2010 (Source: Stockcharts.com)

Based on a study of these 3 major emerging markets, I believe the technical outlook for the emerging markets in general remained unchanged, which is slightly bearish for the next 2-3 months.
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4 comments:

  1. cheerThursday, February 18, 2010 7:50:00 PM

    Alex, don't mind to comment the Etitech. TQ

    ReplyDelete
  2. Alex LuFriday, February 19, 2010 9:00:00 AM

    Hi Cheer,

    Etitech has formed a bottom & is now on the recovery phase. Good entry is at RM0.48-49 & thereafter at RM0.46-47.

    ReplyDelete
  3. ronnieSaturday, February 20, 2010 4:16:00 PM

    Mr Lu, What are your thoughts on the logistics sector ? The privatisation of Integrated Logistics proves many companies in the sector are grossly undervalued. Prime examples are Freight Management, Century Logistics, etc.

    ReplyDelete
  4. Alex LuMonday, February 22, 2010 12:55:00 PM

    Hi Ronnie,

    I have posted on both Freight & Century sometime back. Both are well-managed companies. Technically speaking, they are trading quite near to their strong support now. Freight has a strong horizontal support at RM0.65-68, while Century's uptrend line support is at RM1.50.

    I am not sure we can draw sweeping conclusion regarding the logistic sector based on the action of some of the players. Certainly. the surviving players in many industries may enjoy a period of higher profit as they enjoy the fruits of lesser competition, after the recent shakedown. The abnormal profit may soon recede as customers demand for lower prices, etc.

    ReplyDelete