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Analyzing the Egyptian Index with 3 Line Break

Jan. 31, 2011 6:37 AM ETEGPT
Jeff Pierce profile picture
Jeff Pierce's Blog
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I wanted to take a look at EGPT and see if there was a difference in the types of charts to see if one can gain an edge in getting short. When looking at a 3 line break chart of the Egypt Index you can see a bearish wedge forming with multiple points of contact that ensures a breakdown should see a rapid fall. In late November it pierced the bottom trend-line but the RSI stayed above 50, which is a doesn’t confirm the weakness. A quick snap-back followed the breakdown and the stock continued back up to it’s upper trend-line.

The next time it broke-down, it did so with a massive red candle with volume, and the RSI slicing through the 50 level, which confirmed that this weakness is real, especially with the macro news that was the catalyst for this move. That would have been a traders cue to exit any long positions and get short.

The regular candlestick chart is more of a upward sloping channel  that has more of a bullish hue to it than bearish. When looking at this chart view, it’s easier to think that the breakout is going to resolve to the upside, given that the trend has been up for the prior 6 months. Of course once it did breakdown through the lower channel, the bear flag (not annotated) was easy to spot with the logical next move being down. There’s really no way to know how far this market can drop at this point as we are entering unchartered territory as seen by the next chart.

Long Term View

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