16/02/2014 09:38 AST
The QE Index extended its relentless rally in a truncated week, registering gains on every single trading day tagging a new 52-week high. The positive development was that the index managed to cling onto its support near the 11,170.0 level and cleared the (11,200.0, 11,300.0, 11,400.0 and 11,500.0) psychological levels as strong buying interest pushed the index at its highest point since 2008. The index after witnessing a strong rally a couple of weeks back, witnessed correction creating a strong base near the 11,000.0 level and rebounded to record an impressive rally. The index is currently in strong bull-run mode and may continue its bullish momentum toward the 11,600.0-11,700.0-750.0 levels as it has little resistance until then. We believe the bulls may continue their dominance over the bears until the index trades above the support of the ascending trendline. However, traders may need to keep a close watch near the 10,450.0 level for any reversal signs. Any dip below this level may provide a buying opportunity near the 10,340.0 level. Meanwhile, the index has support for a further higher move from the RSI which is trending strongly in the overbought territory, while the MACD has crossed the signal line into the positive territory indicating the possibility of a prolonged near-term uptrend. Thus, traders may adopt a bullish approach, and accumulate on every possible dip, but must also follow strict stop losses.
Definitions of key terms used in technical analysis
RSI (Relative Strength Index) indicator – RSI is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between 0 to 100. The index is deemed to be overbought once the RSI approaches the 70 level, indicating that a correction is likely. On the other hand, if the RSI approaches 30, it is an indication that the index may be getting oversold and therefore likely to bounce back.
MACD (Moving Average Convergence Divergence) indicator – The indicator consists of the MACD line and a signal line. The divergence or the convergence of the MACD line with the signal line indicates the strength in the momentum during the uptrend or downtrend, as the case may be. When the MACD crosses the signal line from below and trades above it, it gives a positive indication. The reverse is the situation for a bearish trend.
Candlestick chart – A candlestick chart is a price chart that displays the high, low, open, and close for a security. The ‘body’ of the chart is portion between the open and close price, while the high and low intraday movements form the ‘shadow’. The candlestick may represent any time frame. We use a one-day candlestick chart (every candlestick represents one trading day) in our analysis.
Doji candlestick pattern – A Doji candlestick is formed when a security’s open and close are practically equal. The pattern indicates indecisiveness, and based on preceding price actions and future confirmation, may indicate a bullish or bearish trend reversal.
Gulf Times
Please wait...
