Technical tips (egypt) egx30 march 29, 2012

JAZIRA SECURITIES BROKERAGE

TECHNICAL TIPS (EGYPT) Thursday, March 29, 2012

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**VOLUME ANALYSIS SAYS BUY**

(Last Price: 5040 pt. ) After yesterday’s weird things, we decided to investigate another area

which we think that it will enlighten our way; it’s VOLUME “To make money in this business, you need to know whether

money flows into or out of the market” ~~~~ that what we’re going

to do in the next few pages. We’ll start looking inside the hood of

the engine using classic techniques, then we’ll devote the rest to

comprehensive “volume analysis”.

EGX30 RIC: .EGX30

SIGNIFICANT LEVELS:

First Second Third

Support 4,860 4,800 4,750

Resistance 5,030 5,100 5,190

Stop loss 4,750 4,550 -

Target 5,480 5,600 5,800

THEN WHAT?

~~ Hold

~~ Aggressive medium-term

traders can BUY DIPS

~~ Conservative short/ medi-

um term traders can Buy af-

ter a decisive up-breakout

over 5,060 with heavy vol-

ume



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BOTTOM LINE:

Taking out more that 62% of the June/ Dec 2011 decline, thrust in trading activity (above the 200-day

average activity), Major golden-crossover between the 50– and 200-day EMAs (the two are diverging),

resting on a confluence of significant supports, falling wedge decline structure, declining volume dur-

ing the decline (below the 200-day average activity), and thrust in activity with widen ranges indicate

that; the market is trending up-ward, the market participants were, as we have said before, just taking

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.

CLASSIC ANALYSIS

INDICATOR DESCRIPTION

The 50– and 200– day EMAs consider the

most important moving averages in the

stock markets. A golden crossover signal

occurs when the 50-day EMA penetrates

over the 200-day EMA. This signal, espe-

cially if the two averages are diverging,

carries a tremendous major implication.



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BOTTOM LINE:

Two falling channel materialized in the EGX30 since 2008. a decisive up-breakout over the first was

the last nail in 2008 bear market coffin, as it was the main bullish confirmation signal to March, 2009

bottom. Recurring 2009 structure was our “main secret” that forced us to be bullish on the market at

early December, 2011. Taking out the second falling channel was everything a technician needs to be

bullish on the market. We see that the MACD approaches a confluence of support from the broken

falling channel and from the rising dotted trend line. An up-side bounce is highly expected

MOVING AVERAGE COVERGENCE DIVERGENCE MACD - EGX30


The Moving Average Convergence/

Divergence indicator (MACD) is calculated

by subtracting the value of (26-period) expo-

nential moving average from (12-period) ex-

ponential moving average. A 9-period dotted

exponential moving average (the "signal line")

is automatically displayed on top of the

MACD indicator line.



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BOTTOM LINE:

One of the most classical tool that sort the volume data according to the price move. A decisive up-

breakout over a declining blue line indicated that a fresh “inflows” was getting into the market. A ris-

ing trend in the OBV indicates that the market is rising with rising volume. The green median line ab-

sorbed any decline, so, if the market was declining with heavy volume (and that didn’t happen), this

line will not bear this impact and a down-breakout will be the case, but however, this isn’t a case and

a bounce is just taking place, screaming that the market is rising with heavy volume.

ON-BALANCE VOLUME OBV


On Balance Volume relates volume to price

changes. It is calculated by adding the day's

volume to a cumulative total when the securi-

ty's price closes up, and subtracting the day's

volume when the security's price closes down.

OBV changes precede price changes. The

theory is that smart money can be seen flow-

ing into the security by a rising OBV.



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BOTTOM LINE:

The 2o-day ROC of the Volume wend to the negative area just after the beginning of a decline; that’s

bullish knowing that the volume is taking a quick dib to below its reading 20 days ago while the mar-

ket decline. But, however, a lower lows in prices accompanied by higher lows in the indicator indi-

cates that volume’s decline pace is decelerated and that structure if followed by a thrust in Prices

(over 5,100) and a positive reading in the ROC would signals a beginning of a new up-leg and a sure-

fire buy signal.

VOLUME RATE-OF-CHANGE V - ROC


The Volume Rate-Of-Change (R.O.C.) indica-

tor is calculated by dividing the volume

change over the last x-periods by the volume x

-periods ago. The result is the percent by

which the volume has changed over the last x-

periods. If volume is higher today than x-days

ago, the R.O.C. will be a positive number. If

volume is lower today then x-days ago, the

R.O.C. will be negative.



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BOTTOM LINE:

First of all, the CMF lies over the zero line giving a clear signal that the market is consistently closing

near the high with increased volume.

A positive divergence just over the zero line indicates that, although the market is making lower lows,

the volume is much lower in the current low, than the prior higher low. This also gives a bullish signal

that sellers are not willing to accept lower prices.

CHAIKIN MONEY FLOW CHM


It’s based on the premise that the location of

the close is the key determinant of supply and

demand. It considers volume as buying vol-

ume when closes near the high and selling

volume materialize when closing price is near

the low. CMF is an oscillator that speed up the

signals while keep the efficiency, somehow,

intact.



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BOTTOM LINE:

The PVI (upper line) shows how the market is rising with increased volume, and the lower line NVI

shows how the market is falling with decreased volume. It has been said that if the PVI is over its one

year average (253), then the market is 76% bullish, and you can see how the market hovers well over

its average. But, it also has been said that the if the NVI is over its one year average, the market is

96% bullish!. So far, the market price/volume relationship is good and will get better in the near fu-

ture.

POSITIVE & NEGATIVE VOLUME INDEX PVI & NVI


PVI & NVI accumulate price based on the

actions of volume. So the magnitude of the

price change, with regard to volume, affects

these indicators. Add or subtract to/from the

PVI when today’s volume is greater than yes-

terday’s volume and add or subtract to/from

the NVI when today’s volume is less than

yesterday’s volume



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BOTTOM LINE:

Incorporating a very short-term volume indicator is important to this study. This indicator shows the

relation between price ranges and volume. At March 26 and today the indicator signaled a “SQUAT”

bar. Yet this isn’t bullish signal, but if the market closed over yesterday’s high (5,040) it will be so, as

vacillation price movement with increase in trading activity always put the current trend under a stress

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.

MARKET FACILITATION INDEX MFI


The MFI simply divides the day's range (high

to low) by the total volume. The result shows

the efficiency of price movement by quantify-

ing the price movement per unit of volume. It

compares volume changes with range changes

and produce a workable trading systems.

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Technical tips (egypt) egx30 march 29, 2012

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Transcript of Technical tips (egypt) egx30 march 29, 2012