Technical tips (egypt) egx30 march 29, 2012

TECHNICAL TIPS (EGYPT)
JAZIRA SECURITIES BROKERAGE Thursday, March 29, 2012

EGX30 RIC: .EGX30

SIGNIFICANT LEVELS: **VOLUME ANALYSIS SAYS BUY** THEN WHAT?
~~ Hold
(Last Price: 5040 pt. ) After yesterday’s weird things, we decided to investigate another area ~~ Aggressive medium-term
First Second Third which we think that it will enlighten our way; it’s VOLUME
traders can BUY DIPS
Support 4,860 4,800 4,750 “To make money in this business, you need to know whether ~~ Conservative short/ medi-
money flows into or out of the market” ~~~~ that what we’re going um term traders can Buy af-
Resistance 5,030 5,100 5,190
to do in the next few pages. We’ll start looking inside the hood of ter a decisive up-breakout
Stop loss 4,750 4,550 - the engine using classic techniques, then we’ll devote the rest to over 5,060 with heavy vol-
comprehensive “volume analysis”. ume
Target 5,480 5,600 5,800

1


CLASSIC ANALYSIS

BOTTOM LINE: INDICATOR DESCRIPTION

Taking out more that 62% of the June/ Dec 2011 decline, thrust in trading activity (above the 200-day The 50– and 200– day EMAs consider the
average activity), Major golden-crossover between the 50– and 200-day EMAs (the two are diverging), most important moving averages in the
stock markets. A golden crossover signal
resting on a confluence of significant supports, falling wedge decline structure, declining volume dur- occurs when the 50-day EMA penetrates
ing the decline (below the 200-day average activity), and thrust in activity with widen ranges indicate over the 200-day EMA. This signal, espe-
cially if the two averages are diverging,
that; the market is trending up-ward, the market participants were, as we have said before, just taking carries a tremendous major implication.
profits, the rally should continue gaining momentum, and taking out the 5,060 level is what short-term
traders need to Long the market again.

2


MOVING AVERAGE COVERGENCE DIVERGENCE MACD - EGX30


Two falling channel materialized in the EGX30 since 2008. a decisive up-breakout over the first was The Moving Average Convergence/
the last nail in 2008 bear market coffin, as it was the main bullish confirmation signal to March, 2009 Divergence indicator (MACD) is calculated
by subtracting the value of (26-period) expo-
bottom. Recurring 2009 structure was our “main secret” that forced us to be bullish on the market at nential moving average from (12-period) ex-
early December, 2011. Taking out the second falling channel was everything a technician needs to be ponential moving average. A 9-period dotted
exponential moving average (the "signal line")
bullish on the market. We see that the MACD approaches a confluence of support from the broken is automatically displayed on top of the
falling channel and from the rising dotted trend line. An up-side bounce is highly expected MACD indicator line.

3


ON-BALANCE VOLUME OBV


One of the most classical tool that sort the volume data according to the price move. A decisive up- On Balance Volume relates volume to price
changes. It is calculated by adding the day's
breakout over a declining blue line indicated that a fresh “inflows” was getting into the market. A ris- volume to a cumulative total when the securi-
ing trend in the OBV indicates that the market is rising with rising volume. The green median line ab- ty's price closes up, and subtracting the day's
volume when the security's price closes down.
sorbed any decline, so, if the market was declining with heavy volume (and that didn’t happen), this OBV changes precede price changes. The
line will not bear this impact and a down-breakout will be the case, but however, this isn’t a case and theory is that smart money can be seen flow-
a bounce is just taking place, screaming that the market is rising with heavy volume. ing into the security by a rising OBV.

4


VOLUME RATE-OF-CHANGE V - ROC


The 2o-day ROC of the Volume wend to the negative area just after the beginning of a decline; that’s The Volume Rate-Of-Change (R.O.C.) indica-
bullish knowing that the volume is taking a quick dib to below its reading 20 days ago while the mar- tor is calculated by dividing the volume
change over the last x-periods by the volume x
ket decline. But, however, a lower lows in prices accompanied by higher lows in the indicator indi- -periods ago. The result is the percent by
cates that volume’s decline pace is decelerated and that structure if followed by a thrust in Prices which the volume has changed over the last x-
periods. If volume is higher today than x-days
(over 5,100) and a positive reading in the ROC would signals a beginning of a new up-leg and a sure- ago, the R.O.C. will be a positive number. If
fire buy signal. volume is lower today then x-days ago, the
R.O.C. will be negative.

5


CHAIKIN MONEY FLOW CHM


First of all, the CMF lies over the zero line giving a clear signal that the market is consistently closing It’s based on the premise that the location of
near the high with increased volume. the close is the key determinant of supply and
demand. It considers volume as buying vol-
ume when closes near the high and selling
A positive divergence just over the zero line indicates that, although the market is making lower lows, volume materialize when closing price is near
the low. CMF is an oscillator that speed up the
the volume is much lower in the current low, than the prior higher low. This also gives a bullish signal signals while keep the efficiency, somehow,
that sellers are not willing to accept lower prices. intact.

6


POSITIVE & NEGATIVE VOLUME INDEX PVI & NVI


The PVI (upper line) shows how the market is rising with increased volume, and the lower line NVI PVI & NVI accumulate price based on the
shows how the market is falling with decreased volume. It has been said that if the PVI is over its one actions of volume. So the magnitude of the
price change, with regard to volume, affects
year average (253), then the market is 76% bullish, and you can see how the market hovers well over these indicators. Add or subtract to/from the
its average. But, it also has been said that the if the NVI is over its one year average, the market is PVI when today’s volume is greater than yes-
terday’s volume and add or subtract to/from
96% bullish!. So far, the market price/volume relationship is good and will get better in the near fu- the NVI when today’s volume is less than
ture. yesterday’s volume

7


MARKET FACILITATION INDEX MFI


Incorporating a very short-term volume indicator is important to this study. This indicator shows the The MFI simply divides the day's range (high
relation between price ranges and volume. At March 26 and today the indicator signaled a “SQUAT” to low) by the total volume. The result shows
the efficiency of price movement by quantify-
bar. Yet this isn’t bullish signal, but if the market closed over yesterday’s high (5,040) it will be so, as ing the price movement per unit of volume. It
vacillation price movement with increase in trading activity always put the current trend under a stress compares volume changes with range changes
and produce a workable trading systems.
test and this bar always occur prior to important reversals. So a close over 5,040 is a must to negate
the bar's bearish implications.

8


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9

Technical tips (egypt) egx30 march 29, 2012

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Technical tips (egypt) egx30 march 29, 2012