tag:blogger.com,1999:blog-44462561756596145852024-03-21T23:33:42.920+01:00Inside The MarketCharts, Listed Companies, IPOs, Fundamentals, News, Market Views and so on.Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.comBlogger45125tag:blogger.com,1999:blog-4446256175659614585.post-67069179027059748612021-12-31T18:30:00.001+01:002021-12-31T18:32:28.221+01:00AUD/USD: the multiple tests in a trading range.<p style="text-align: justify;">At a glance, we can notice that the cross is in a trading range (see the yellow rectangle), between 0.72 and 0.727. Those levels are also respectively the 38.20% FIBO level and 50% FIBO level, of a set-up top-bottom 0.755 and 0.70. The 50% FIBO level represents also the upper level of the previous gap-down (see the yellow ellipse).</p><p style="text-align: justify;">In this way, the mentioned price levels are very important because they are redundant. Some useful trading strategies should be the following: </p><p style="text-align: justify;">1) a short set-up from top to bottom (in the trading range, 0.727-0.72);</p><p style="text-align: justify;">2) a long set-up from bottom to top (in the trading range, 0.72-0.727);</p><p style="text-align: justify;">3) a short set-up of a wider scope, with a longer time frame, outside the rectangle; in other words, short at the break of 0.72, with confirmations and targets the lower FIBO levels, before 0.712, then 0.70;</p><p style="text-align: justify;">4) a long set-up of a wider scope, with a longer time frame, outside the rectangle; in other words, long at the break of 0.727, with confirmations and targets the upper FIBO levels, before 0.733, then 0.743.</p><p style="text-align: justify;">With this chart framework, the rectangle (or trading range) is the real focus: so, it is very important to look at it, in order to build our trading strategy, in one direction or another.</p><p style="text-align: justify;">The following chart is explicative, of course. </p><p style="text-align: justify;"><br /></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjV-quaM1XmCoNjMBL2b5hmliJ8dq5KIdOuQHPmCGOzP1iIjqKMJ1HtunuTUd_vs90mXuZNmIoNFA5AAPUnqejqCueSeg5_UswzZ2GubPcpPBfTRCgKjMmkJoSn9VOUdO-IeixOptXzjSTpbBovJRWt6Tm1Rt61pBmOq2F2ktAKuhpZkTKzC0XAVTSe=s1366" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="768" data-original-width="1366" height="225" src="https://blogger.googleusercontent.com/img/a/AVvXsEjV-quaM1XmCoNjMBL2b5hmliJ8dq5KIdOuQHPmCGOzP1iIjqKMJ1HtunuTUd_vs90mXuZNmIoNFA5AAPUnqejqCueSeg5_UswzZ2GubPcpPBfTRCgKjMmkJoSn9VOUdO-IeixOptXzjSTpbBovJRWt6Tm1Rt61pBmOq2F2ktAKuhpZkTKzC0XAVTSe=w400-h225" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://uk.markets.com/?&intent_group=SB&u2=https://uk.markets.com/&u3=Online%20trading%20|%20CFDs%20|%20Spread%20Betting%20|%20Markets.com" target="">Markets.com</a></td></tr></tbody></table><br /><p style="text-align: justify;">If we change the time frame, with a 4H chart, the view is the same.</p><p style="text-align: justify;">The chart shows the multiple tests of the cross, at the tops of the rectangle. The tests are highlighted also by other indicators and oscillators, like RSI, CCI, and Williams %R.</p><p style="text-align: justify;">The cross is in the overbought area: +100 for CCI, -20 for Williams %R, and +70 for RSI. This should represent a trend change (from an uptrend to a downtrend, from overbought area to oversold area) if the confirmations will occur, as previously said. At the moment it could be just a movement included in the trading range and a repulsion area with the tops of the rectangle as a resistance area.</p><p style="text-align: justify;">The same thing is valuable in the hypothesis of the uptrend continuation (and not a reversal, in this way), with the break of the mentioned resistance area. </p><p style="text-align: justify;">To conclude, let's keep focused on the rectangle and on its levels, also if we look at the candlesticks chart: there are a lot of Doji candles and candles with large shadows; they represent a lack of trend, for the moment and otherwise, they are the symbol of a real trading range area.</p><p style="text-align: justify;"><br /></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjfZzGT9jJuXafr0xKeIYyZrndfEENplDliZr10Q18QHAgqvyZQiTbSHYDZ41PVmN9GETyUZqEa2G8WOlDb3fkdBXMT6M_si4-NmBAx3X3AH3dIJo6vfkSofu9e4IQc6sRBPFMi4DmybaTI3nA_w7NsZdXSSkMwfVvO-L0eyDGUsJSU393jh5OCkpuG=s1366" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="768" data-original-width="1366" height="225" src="https://blogger.googleusercontent.com/img/a/AVvXsEjfZzGT9jJuXafr0xKeIYyZrndfEENplDliZr10Q18QHAgqvyZQiTbSHYDZ41PVmN9GETyUZqEa2G8WOlDb3fkdBXMT6M_si4-NmBAx3X3AH3dIJo6vfkSofu9e4IQc6sRBPFMi4DmybaTI3nA_w7NsZdXSSkMwfVvO-L0eyDGUsJSU393jh5OCkpuG=w400-h225" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://uk.markets.com/?&intent_group=SB&u2=https://uk.markets.com/&u3=Online%20trading%20|%20CFDs%20|%20Spread%20Betting%20|%20Markets.com">Markets.com</a></td></tr></tbody></table><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div>Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com23100 Sondrio, Province of Sondrio, Italy46.1698583 9.878767446.122303480437083 9.81010284921875 46.21741311956292 9.94743195078125tag:blogger.com,1999:blog-4446256175659614585.post-24186493734750774432021-01-17T20:42:00.001+01:002021-01-17T20:42:33.227+01:00EUR/GBP: a test of the lows.<div style="text-align: justify;">At first glance, we can notice the repeated test of the bottoms; this fact is known as a confirmation of the buyers' strength in that resistance area: for this purpose, look at the green arrows; the fact is recurring six times if we consider also the last trading session; a break with other confirmations could trigger a bearish set-up until 61.80% FIBO level (at about 0.874) or even below that level, at about 0.867, the lower side of the first rectangle area (from April to June).</div><div style="text-align: justify;"><br />Indeed, the mentioned lows are highlighted also by the lower side of the following rectangle areas (from June to September; from September until today. The last rectangle area is bordered at the top by 23.60% FIBO level that links the top (at about 0.949) and the double bottoms, at about 0.827 (100% retracement). </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The chart shows also the discharge of both oversold and volatility, from the lower band of the BBs and the consequential rebound in prices: it is very important to follow the next trading sessions, in order to understand the market moves and in order to set a bullish or trading strategy, respectively; the chart picture is very promising in a rebound, considering what happened before. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRc5WzEX0DPdocVnnwoqmyDE7e77t5m-LSX6heBO9I5PCJn55Dag2D-nUU40qCfoW6eXC_oqY-aV-FKcyD3NY5Fyw5YwjXw1uuDvT6AHjC5-W5YHhqYBe-ND4SagFdPKaJtAds66fJjQA/s1366/chart.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="768" data-original-width="1366" height="225" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRc5WzEX0DPdocVnnwoqmyDE7e77t5m-LSX6heBO9I5PCJn55Dag2D-nUU40qCfoW6eXC_oqY-aV-FKcyD3NY5Fyw5YwjXw1uuDvT6AHjC5-W5YHhqYBe-ND4SagFdPKaJtAds66fJjQA/w400-h225/chart.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://markets.com/">Markets.com</a></td></tr></tbody></table><br /><div style="text-align: justify;"><br /></div><div style="text-align: justify;">To conclude, the price is also near the 50% FIBO level at about 0.888, a critical level in one direction or another. Let's look at it, in assessing the market intentions. </div>Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com23100 Sondrio, Province of Sondrio, Italy46.1698583 9.878767417.859624463821156 -25.2774826 74.480092136178854 45.0350174tag:blogger.com,1999:blog-4446256175659614585.post-10109770390992464582020-09-23T15:08:00.004+02:002020-09-23T15:08:53.202+02:00EUR/CHF: a trading range. <div style="text-align: justify;">If we look at the chart, we can notice that the most suitable trading strategy is the trading range, among the two FIBO levels, respectively at about 1.072 (lower level and support, buy-level) and at about 1.085 (upper level and resistance, sell/short-level). The two levels represent 38.20% and 78.60%, FIBO retracements of the movement top-bottom, from the high of June 2020 (1.091) to the low of July 2020 (1.06). The prices are fluctuating in that trading range area or rectangle area: in other words, the break of the upper or of the lower area could trigger two targets above and below, at least near the previous top (100% FIBO) or at least near the previous bottom (0% FIBO).<br />If the conditions will not change, this is the current context, due to the chart framework.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJwFqQGEq4aX-mTfUTOZzWvfyVGTBFocD7urHKlvDY9hAkUPaDMqgPeDzOXzWLlxalVYeMp3M6wHnhaU20DpF2LqMNEQ-dP760zvWZVR1U5ahecI6xGd8yeaRYIrhNXi0y-TWVEvcRdrQ/s1354/CHART.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="748" data-original-width="1354" height="221" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJwFqQGEq4aX-mTfUTOZzWvfyVGTBFocD7urHKlvDY9hAkUPaDMqgPeDzOXzWLlxalVYeMp3M6wHnhaU20DpF2LqMNEQ-dP760zvWZVR1U5ahecI6xGd8yeaRYIrhNXi0y-TWVEvcRdrQ/w400-h221/CHART.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://markets.com/" target="_blank">Markets.com</a></td></tr></tbody></table><br /><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><div>The trading range is marked also by the flattening of the EMA bundle and also by other indicators like MACD, RSI, CCI. The latter report neither an overbought nor an oversold area. It is a general flattening and rebalancing among bulls and bears. After a bullish wave until 1.091, we have seen total reabsorption: now, it is a lateral trend marked by the restricted volatility of the BBs and of the PSAR.</div><div>The presence of small candles or candles with small bodies emphasizes the mentioned market context: we speak of many candles with upper or lower shadows or Doji candles; the only and remarkable ups and downs are shown by long candles, green or red, however always within the rectangle area.</div><div>We just have to wait for the next market sessions; until then, we need to trade that area.</div></div>Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com23100 Sondrio, Province of Sondrio, Italy46.1698583 9.878767417.859624463821156 -25.2774826 74.480092136178854 45.0350174tag:blogger.com,1999:blog-4446256175659614585.post-4733214308098162912020-05-03T16:40:00.000+02:002020-05-03T16:40:22.898+02:00AUD/NZD: a pullback.<div style="text-align: justify;">
At first glance, we can notice a pullback in the chart, from the previous top at 1,075.</div>
<div style="text-align: justify;">
The pullback comes from the upper band of the BBs. It is also highlighted by a candlestick pattern: specifically, a shooting star; its upper shadow (maximum) represents the stop loss of a short trading strategy; then, the red color and the following red candles are a reliable signal, for this purpose.</div>
<div style="text-align: justify;">
Anyway, it is too early to speak about a trend reversal even if this signal is a good starting point. </div>
<div style="text-align: justify;">
Let's look at the next trading sessions, at the crossover, respectively, of the RSI (repulsion from the overbought area, 70), of the MACD (cross of the signal and MACD line) and of the momentum (from above to below, the zero line).</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-3Pi-jHCQiZCmPBUz-PP_5371S55Wj9CH4oS1xntn0O2GxoKV9wOaN6gnSKGuuzHvQIlQfYv0D6yrHjpwrNhs3lRLlIYaFzpot0qHwrUn1SHjvwoti6riO4UrCyxCWyyYq8C1ntRnsYE/s1600/CHART.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="745" data-original-width="1350" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-3Pi-jHCQiZCmPBUz-PP_5371S55Wj9CH4oS1xntn0O2GxoKV9wOaN6gnSKGuuzHvQIlQfYv0D6yrHjpwrNhs3lRLlIYaFzpot0qHwrUn1SHjvwoti6riO4UrCyxCWyyYq8C1ntRnsYE/s400/CHART.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://markets.com/">Markets.com</a></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXadmUDPFGwH7OoYTGVx38LptGuKcq843GSlQkRBVgHnf3yTkz2TKIQy2tkgSFVAL_0dbaq-FiOUtmaoLwf0iorHIXiIqk2y0jmTyAb_TTbV9V8XsKmToiBX8sLiLG1M8xepmHJSDsrlo/s1600/chart+I.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="746" data-original-width="1352" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXadmUDPFGwH7OoYTGVx38LptGuKcq843GSlQkRBVgHnf3yTkz2TKIQy2tkgSFVAL_0dbaq-FiOUtmaoLwf0iorHIXiIqk2y0jmTyAb_TTbV9V8XsKmToiBX8sLiLG1M8xepmHJSDsrlo/s400/chart+I.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
With the confirmation of the trend reversal, it will be interesting the evolution of the chart framework, in particular, about the test of the yellow area, the rectangle, that previously, represented a trading range area, before the current bullish trend. The lows of the rectangle are the main references for the reason that these minimums and support levels were very important, in the past (38.20% FIBO retracement, 1.031/1.032). The same thing for the upper line (61.80% FIBO level, 1.053).</div>
<div style="text-align: justify;">
Finally, it is interesting also to look at the volatility: BBs, upper, lower and the median line (red line); the slope and the cross of the EMAs bundle (they are very flattened in the rectangle and TR area; otherwise, they are widely spaced in the bullish and bearish momentum). We can say the same of the parabolic SAR (the black dots).</div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767446.1258713 9.798086399999999 46.2138453 9.9594484tag:blogger.com,1999:blog-4446256175659614585.post-22634582944056566062020-01-06T15:18:00.000+01:002020-01-06T17:08:05.525+01:00NZD/USD : chart framework.<div style="text-align: justify;">
At first glance, we can notice the beginning of a downtrend (this last one should be confirmed in the next trading sessions, of course). This is due to :</div>
<div style="text-align: justify;">
</div>
<ul>
<li style="text-align: justify;">A Doji candlestick pattern (it emphasizes both weakness and indecision in an uptrend ; if it is confirmed in the subsequent sessions, it is a good signal) ;</li>
</ul>
<ul>
<li style="text-align: justify;">Linked to the previous aspect, the are also two red candles ;</li>
</ul>
<ul>
<li style="text-align: justify;">The BBs shows the overcoming of the currency cross on the upper band (for this purpose, see the shadow of the Doji) ;</li>
</ul>
<ul>
<li style="text-align: justify;">The RSI shows an overbought area (above 70, see the bullish trendline of the indicator and its blue line) ;</li>
</ul>
<ul>
<li style="text-align: justify;">The upper shadow of the Doji represents a repulsion area (look at the previous top and at the horizontal line).</li>
</ul>
<div>
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6dXErWKtivd_uiOmuGZ-EyMOwSipCxrdH5GUrnHFZTpp30GwQzOZNyPm7m34HeaLVG1Drl0yrTD-9N6VKbYifGYOvggpAxMNgDAHdiq3O5GqvRi5kjljieiqOK4eTJcp9N2l7YTK0L1M/s1600/CHART+I.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="768" data-original-width="1366" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6dXErWKtivd_uiOmuGZ-EyMOwSipCxrdH5GUrnHFZTpp30GwQzOZNyPm7m34HeaLVG1Drl0yrTD-9N6VKbYifGYOvggpAxMNgDAHdiq3O5GqvRi5kjljieiqOK4eTJcp9N2l7YTK0L1M/s400/CHART+I.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Let's have a look at the following charts. We can notice that the bullish trend is well set, marked by the parallel channel. However, there are the first symptoms of subsidence, due to the above-mentioned reasons and due to other indications. The MACD shows the crossing of the red and blue lines and crossing of the histograms, from top to bottom (over line zero).</div>
<div style="text-align: justify;">
Moreover, we are in the proximity of the test of 23.6% FIBO level and near the median line (BBs) and EMA 20 (a break of this level, it would be a great short signal ; see the yellow ellipse). </div>
<div style="text-align: justify;">
The second bearish target will be the 50% FIBO level (this last one is also the double bottom, see the green arrows and blue ellipse). </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5ZfcGjm-GWrPxWqu-BKm9HzXjy9RXHjthmVDsQqh2VtKKJ0UeWdpxKrN3KxLR4T7ooi2fJ2l_S9WeoLyDe5iA5Hb1Kci9haJsuiDq0ACZvj9ZCObwLOxtUDb7_h7bERjwQJ3AGrSzuiI/s1600/CHART+II.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="768" data-original-width="1366" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5ZfcGjm-GWrPxWqu-BKm9HzXjy9RXHjthmVDsQqh2VtKKJ0UeWdpxKrN3KxLR4T7ooi2fJ2l_S9WeoLyDe5iA5Hb1Kci9haJsuiDq0ACZvj9ZCObwLOxtUDb7_h7bERjwQJ3AGrSzuiI/s400/CHART+II.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVuniq50vWlSu15vjAvwsUAx8kGZblVol7_bE7DCy6z8JiUUl0Gy3lCneJ34LYF2dIq2k15syxu4n0w1CPMgwRD6g-VDY_TnfAe-XZsbsX_tk9U40GIXlXVJoaa9s2xb_ECqPd2-yl1XU/s1600/CHART+III.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="768" data-original-width="1366" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVuniq50vWlSu15vjAvwsUAx8kGZblVol7_bE7DCy6z8JiUUl0Gy3lCneJ34LYF2dIq2k15syxu4n0w1CPMgwRD6g-VDY_TnfAe-XZsbsX_tk9U40GIXlXVJoaa9s2xb_ECqPd2-yl1XU/s400/CHART+III.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
In the following chart, the parabolic SAR is set, in the form of black crosses. There is a first black cross above the candles. We need almost two or three other crosses for a clear and short signal. </div>
<div style="text-align: justify;">
So, lets' follow the next trading sessions.</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMHaBCyTn6GHq_9OvvU2S42Mdh4-it075pJtA83UcP9sFwY1x2XoqZ6Nb_Ph8kfRXepNPRJK13DDGyzATvNoHYJMm7WhuSzziN5BrIj17YsPf3M6pLHlB0OF8acEYa-1P2AygITTtUrBA/s1600/CHART+IV.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="768" data-original-width="1366" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMHaBCyTn6GHq_9OvvU2S42Mdh4-it075pJtA83UcP9sFwY1x2XoqZ6Nb_Ph8kfRXepNPRJK13DDGyzATvNoHYJMm7WhuSzziN5BrIj17YsPf3M6pLHlB0OF8acEYa-1P2AygITTtUrBA/s400/CHART+IV.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br />
Finally, we can say that there is not a strong trend reversal, at the moment. It is too early to speak about it. In spite of this, there are good signals of the weakening of the current trend : if it will be confirmed, it will allow us to set up a bearish trading strategy with the first target 23.60% FIBO level and the second target 50% FIBO level. We can take a few more risks by anticipating and benefit from the movement, with a tight stop loss just above the maximum of the Doji (at about 0.68).</div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-20501021359297286282019-11-24T20:46:00.001+01:002019-11-24T20:46:19.131+01:00COCOA : chart framework.<div style="text-align: justify;">
At first glance, we can notice a volatility exhaust: there is a repulsion from the previous top (0% FIBO level); the commodity is in the upper line of the BBs, then the RSI shows an overbought momentum (the red line crosses from above to below the higher limit at about 70.00). </div>
<div style="text-align: justify;">
The bullish impulse seems to stop (see the white candles): anyway, it represents just a break in the uptrend; for this reason, look at the parallel channel that clearly highlights the bullish trend (mid/long time frame); there was only a sideways interlude (light-blue rectangle).</div>
<div style="text-align: justify;">
About that, the rectangle pattern is a reference area useful to set up a trading strategy, respectively short with the break of the same or long if the area stays immaculate (in other words, accumulation area with target the previous maximums). The middle area (so mentioned) is limited also by the 23.60% FIBO level and 61.80% FIBO level (look at the green and red arrows). </div>
<div style="text-align: justify;">
Not randomly, the 23.60% FIBO level is limited by the yellow line: this last one is the median value of the real body (long white candle); generally, it is a strong reference. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioII5yG5-EYSJxCDA-dpkP7aDzIAbYe93yf3cCxwzTz1lEPK702wTIwLXqbyRFtBQCycwTmYh9eFjhyESxaGsE11widop0Xsyk0TbIp-bYGSSvOZ1E7kZ23PJnbAK8RVUGAkWy9IbeoGQ/s1600/Immagine.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="742" data-original-width="1344" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioII5yG5-EYSJxCDA-dpkP7aDzIAbYe93yf3cCxwzTz1lEPK702wTIwLXqbyRFtBQCycwTmYh9eFjhyESxaGsE11widop0Xsyk0TbIp-bYGSSvOZ1E7kZ23PJnbAK8RVUGAkWy9IbeoGQ/s400/Immagine.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The situation is the same if we analyze the following chart: the slope, the direction and the intersections of EMA bundle (9, 20, 40) show the market direction and trend; bearish, bullish with the parallel channel (with a lateral trend, see the rectangle), then volatility exhaust.</div>
<div style="text-align: justify;">
Another signal is given by the MACD: we are near the crossover of the signal line with the MACD. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheaVUvESqE3l_AgDfPZztu-ROgErxFfgCSIJdN00EVulmD3KNWfTKZNmvoPO-Z1rggsHR3dvR4_11QyaDBj-1gIcdVpvjsoLb5S5WQNXzDsQDmBu_wjnVRsqYfTSaa1EfbFWwjO5sQJYc/s1600/Immagine+1.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="742" data-original-width="1347" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheaVUvESqE3l_AgDfPZztu-ROgErxFfgCSIJdN00EVulmD3KNWfTKZNmvoPO-Z1rggsHR3dvR4_11QyaDBj-1gIcdVpvjsoLb5S5WQNXzDsQDmBu_wjnVRsqYfTSaa1EfbFWwjO5sQJYc/s400/Immagine+1.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Lastly, if we consider a different time frame (240), it is just a confirmation of what is said above: there is the bullish trend with a break due to the volatility exhaust; there is an additional reference, at about 2616 (the top of the white candle and the last minimum). </div>
<div style="text-align: justify;">
We need to monitor the next trading sessions: at present, the trend is bullish of course with a small discharge of the strength of the buyers.</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhRZxfnxTxTb3qBGP-5NqxVPytWBCGBf8APcEtdvRT9-jo2C4vqBynaR0_JvzNUGS9DeAJHCXd4NPq2vi_Uo0AE7Kh-tpBpAz3PTGS89wICrU1DSZvNfIYPTemmMk66giY0J7FJNtd6NxU/s1600/Immagine+2.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="744" data-original-width="1349" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhRZxfnxTxTb3qBGP-5NqxVPytWBCGBf8APcEtdvRT9-jo2C4vqBynaR0_JvzNUGS9DeAJHCXd4NPq2vi_Uo0AE7Kh-tpBpAz3PTGS89wICrU1DSZvNfIYPTemmMk66giY0J7FJNtd6NxU/s400/Immagine+2.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-54864403918465563882019-10-13T21:03:00.001+02:002019-10-13T21:03:54.395+02:00EUR/USD : bearish trend.<div style="text-align: justify;">
The currency cross is clearly bearish. In this way, let's look at the parallel channel and at its trendlines. </div>
<div style="text-align: justify;">
The support line is at about 1.09 (0% FIBO level). The FIBO retracements start with the 100% level at the previous top (1.155). We can notice that 50% (a key level) is marked by a previous bottom (it is placed at the lows of two long candles). </div>
<div style="text-align: justify;">
Lately, we can notice a bounce. However, it could represent just a volatility exhaust from oversold (see the BBs). In the medium term, the trend is still bearish. In the short term, as I said previously, there is a bounce with the test of 23.60% FIBO level (1.104).</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigH7iohVTEtsO4wMmk5zRiDo_iRbUK0gMZrqT0lioL6LOpahQ_q2ibnXv6K9VXaBCVAnEmQs8si5gt4vmE4jXKtc7gjsyVV6PGBNPyccIvpbSjjM4BizbXgBL-R9cOZvwWBH3y5sI_qgI/s1600/Immagine.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="742" data-original-width="1347" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigH7iohVTEtsO4wMmk5zRiDo_iRbUK0gMZrqT0lioL6LOpahQ_q2ibnXv6K9VXaBCVAnEmQs8si5gt4vmE4jXKtc7gjsyVV6PGBNPyccIvpbSjjM4BizbXgBL-R9cOZvwWBH3y5sI_qgI/s400/Immagine.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
With a weekly timeframe, the bearish trend is moreover confirmed: see the slope of the EMA bundle, the parallel channel (the second one). On the other hand, the bearish trend is not as emphasized as the previous bullish trend of the year 2017.</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmiYQogS5EVHOOFTJ6OKle-LeuF3Q1o5aK-eCOMGHjMdGw0nRHC07P1wscWF0Ch2R1D0pdvf_mwIMgXkqyNMxBAV7ZhOPXaovM28pxM3Ty5JlIsApMknJkCl3uKO_UwXLimsonIq47frY/s1600/Immagine1.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="742" data-original-width="1350" height="218" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmiYQogS5EVHOOFTJ6OKle-LeuF3Q1o5aK-eCOMGHjMdGw0nRHC07P1wscWF0Ch2R1D0pdvf_mwIMgXkqyNMxBAV7ZhOPXaovM28pxM3Ty5JlIsApMknJkCl3uKO_UwXLimsonIq47frY/s400/Immagine1.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
To conclude, let's take a look at the last trend (it is more interesting, due to the rebound in progress, as explained above). The rebound started from the minimum at about 1.09. With the last trading sessions, he had a setback: there is a potential overbought (see the RSI indicator); then, the candles left the upper band of the BBs. For this reason, at the moment, there is a clear test of the previous maximum at about 1.104-1.105. The next trading sessions will be very important to understand the market direction (just a pullback or the beginning of a bearish trend also in the short term). Indeed, it is too early to speak about a bearish trend in the short term: the candles are quite far from the midline of the pitchfork; then, there is not the break of the 23.60% FIBO level (1.09-1.104).</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCEkreztypIThN2Yks9H9ZJEdGvqAYPWjeLZLTGDWNHWuD2-hMkim_htm-8VWj3MXBX0D0Kjhwua4cLi-gYs-6YQNuXxpvd7s3IlqJKU9gJ_uVZGwpQsSRJ8InYhucZYCFu9SOC8ygz10/s1600/Immagine2.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="742" data-original-width="1347" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCEkreztypIThN2Yks9H9ZJEdGvqAYPWjeLZLTGDWNHWuD2-hMkim_htm-8VWj3MXBX0D0Kjhwua4cLi-gYs-6YQNuXxpvd7s3IlqJKU9gJ_uVZGwpQsSRJ8InYhucZYCFu9SOC8ygz10/s400/Immagine2.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-21922193824804611222019-09-17T21:38:00.000+02:002019-09-17T21:38:18.047+02:00CRUDE OIL : bullish momentum (dumped).<div style="text-align: justify;">
We can notice that the bullish momentum with the last upside has been dampened, for the reason that the white candle is represented by a high wave pattern. The shadows show an equilibrium among the bearish and bullish strengths. </div>
<div style="text-align: justify;">
Then, the gap up has been covered as quickly as possible: in this way, the following candle is a black candle that neutralized the previous candle. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjS0ZBtdmOBE5bYbOoxJ7lrH4m6tPt2FeizuZaCog0YsowxzwyLl03jo_eGOaeLCAuzztZNspvVGWtjERv5W8Rwu70iDFFqRce0Pnr3KxsAPJpXI7f37XWSZyts-0A_UXdxRHcu-lOic-c/s1600/Immagine.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="742" data-original-width="1347" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjS0ZBtdmOBE5bYbOoxJ7lrH4m6tPt2FeizuZaCog0YsowxzwyLl03jo_eGOaeLCAuzztZNspvVGWtjERv5W8Rwu70iDFFqRce0Pnr3KxsAPJpXI7f37XWSZyts-0A_UXdxRHcu-lOic-c/s400/Immagine.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The chart shows also the FIBO retracements: 38.20% and 23.60% FIBO levels are respectively at the low of the black candle (see the gap down) and at the previous minimums. </div>
<div style="text-align: justify;">
At the moment, in order to set up a trading strategy, it needs to understand the market direction: the high wave could represent a trading range area; only with a break of the upper or of the lower limit (see the green and red arrows), we could set a bullish or bearish strategy. </div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-53663293863122668912019-09-01T16:21:00.001+02:002019-09-01T16:21:22.593+02:00COFFEE : technical analysis.<div style="text-align: justify;">
At first glance, we can notice a break in the downtrend. This last one started in July.</div>
<div style="text-align: justify;">
The previous trend was bullish, see the parallel channel. </div>
<div style="text-align: justify;">
The break of the downtrend is bordered by the two dotted lines (at about 95 and 100): the 95 value represents also the previous support line and the 100 value is fixed at the maximum of the black Marubozu candle.</div>
<div style="text-align: justify;">
The break in the downtrend is also highlighted by the flattening of the MACD indicator and by the proximity of the three lines of the BBs (in this way, the volatility is fairly limited). The real bodies of the candles are not so wide and there aren't so many shadows, compared to the previous ones. </div>
<div style="text-align: justify;">
There are also two references: the top at about 125 and the bottom at about 87.</div>
<div style="text-align: justify;">
See the image below. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhFuxA4lRZb4QfOj4KZp4v3CcedUrP9_KNoW0xJXNHPA3taR6Bgy-eTm8e3ESnrtUhoKyAliBsG1JhzIlis0Tqbv4tpFNkqgdTOTNYtIDY5e1RpxWF7pRmLI6V1__nREc1hN5EK00ROhcU/s1600/Immagine.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="744" data-original-width="1346" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhFuxA4lRZb4QfOj4KZp4v3CcedUrP9_KNoW0xJXNHPA3taR6Bgy-eTm8e3ESnrtUhoKyAliBsG1JhzIlis0Tqbv4tpFNkqgdTOTNYtIDY5e1RpxWF7pRmLI6V1__nREc1hN5EK00ROhcU/s400/Immagine.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
If we use another timeframe, for example, 4H timeframe, we can get a focus.</div>
<div style="text-align: justify;">
The break (from August to September) in the downtrend is confirmed, too. The lack in the slope of the EMA bundle highlighted this concern while in the previous situations, the slope is so marked and the flattening is totally faraway. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLhCKya3Pm38WVmGN1DhTSejiwdwCTrSMByes1XLN5RSSvU0WNpmV7s0DxSnHnOwrJlCPk2QmYek6ycQuskP-LXzTksg05Hw0i554PSuG8-8LWKfmdmBPqT_dabRo2kRQt0FmhCecwI5U/s1600/Immagine1.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="739" data-original-width="1349" height="218" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLhCKya3Pm38WVmGN1DhTSejiwdwCTrSMByes1XLN5RSSvU0WNpmV7s0DxSnHnOwrJlCPk2QmYek6ycQuskP-LXzTksg05Hw0i554PSuG8-8LWKfmdmBPqT_dabRo2kRQt0FmhCecwI5U/s400/Immagine1.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.markets.com/">Markets.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
To conclude, pay attention to the two references at 95 and 100. In this way, there is a trading range area that can be used to set up a trading strategy. With the break respectively of the upper area or of the lower area, we could set up another trading strategy, bullish or bearish. As usual, it needs other signals that confirm that hypothesis.</div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-43541029275632319762019-03-30T20:28:00.001+01:002019-03-30T20:28:31.618+01:00IMA S.p.A. : high wave pattern.<div style="text-align: justify;">
With regard to the chart of IMA, we can notice a high wave pattern. </div>
<div style="text-align: justify;">
It is a particular candlestick pattern that underlines the market indecision. In this way, after the full year 2018 data release, and after a bullish trend, with the break of the previous congestion area, the bullish trend stopped. The market maker is evaluating the situation.</div>
<div style="text-align: justify;">
Indeed, the buyers, at the closing, left (the long upper shadow of the candle changed into a small real body). In the same way, the sellers left, for the reason that the long lower shadow changed into a small real body: there was strong volatility with a rebalancing of the positions sellers-buyers. </div>
<div style="text-align: justify;">
See the following chart and the pattern. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3LgyHfFadw3LDKQftL4wZIcZn4AWSge6x_YlzOadGO04P1u116Ce8g4vssCML_M3LiBNN2isiCi7_24pd71Pv6xXIJatAc2lsbtbQgkkz71PskBjWQeHG-uaEChWGcitHxz_9vYpIdBY/s1600/tvc_0d4cf317d8cbe4570a670ac1de367ef0.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3LgyHfFadw3LDKQftL4wZIcZn4AWSge6x_YlzOadGO04P1u116Ce8g4vssCML_M3LiBNN2isiCi7_24pd71Pv6xXIJatAc2lsbtbQgkkz71PskBjWQeHG-uaEChWGcitHxz_9vYpIdBY/s400/tvc_0d4cf317d8cbe4570a670ac1de367ef0.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The upper and lower shadow represent respectively the resistance and the support area.</div>
<div style="text-align: justify;">
The market will make a decision when there will be a break of the support or of the resistance line.</div>
<div style="text-align: justify;">
As usual, we need other confirmations. In this sense, it is useful to check the pattern requirements.</div>
<div style="text-align: justify;">
In the high wave pattern, there are some conditions : </div>
<div style="text-align: justify;">
</div>
<ul>
<li>A small real body ;</li>
<li>A long upper shadow ;</li>
<li>A long lower shadow ;</li>
<li>The length of the upper/lower shadow should be three times the real body.</li>
</ul>
<div>
With regard to the last one, we can observe that :</div>
<div>
<ul>
<li> O (open) - C (close) = small real body = 66.60 - 66.25 = 0.35</li>
<li> H (high) - O (open) = long upper shadow = 68.50 - 66.60 = 1.90</li>
<li> C (close) - L (low) = long lower shadow = 66.25 - 62.80 = 3.45</li>
</ul>
<div>
The pattern requirements are met because :</div>
</div>
<div>
<ul>
<li>1.90/0.35 = 5.43</li>
<li>3.45/0.35 = 9.86</li>
</ul>
<div>
Finally, let's look at the market mood and at the next trading sessions, to understand the intentions of the market players. For greater clarity, the following image shows what I explained before.</div>
</div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYuRe7EVXoFbnbD8ZTmBURGKQwk88CAm7h4De5XMwVCQWOzjulH8B7bw7yrhZCvPxco86BRrl_hTp1CHptG8pOfqdZ0Gll-ClgM4m4776tL4pwo-CV_MldO1JyYojaWluWx7zYoAA2S30/s1600/Immagine.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="465" data-original-width="253" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYuRe7EVXoFbnbD8ZTmBURGKQwk88CAm7h4De5XMwVCQWOzjulH8B7bw7yrhZCvPxco86BRrl_hTp1CHptG8pOfqdZ0Gll-ClgM4m4776tL4pwo-CV_MldO1JyYojaWluWx7zYoAA2S30/s320/Immagine.png" width="173" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">High wave pattern</td></tr>
</tbody></table>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-9678483185597380232019-03-09T16:11:00.000+01:002019-03-09T16:11:15.750+01:00EUR/JPY : test of the supports. <div style="text-align: justify;">
At a glance, with a daily timeframe, we can notice that the cross broke the previous support (see the yellow ellipses). The support is composed of two bottoms. </div>
<div style="text-align: justify;">
The two bottoms represent also a past resistance that was broken by the cross with a bullish candle, on July 2017. The trend is bearish, highlighted by a red candle. There is a rejection from 127.62.</div>
<div style="text-align: justify;">
The downtrend is confirmed also by the bearish trendlines (see the second chart). </div>
<div style="text-align: justify;">
However, in the short-term, the is a test of the bullish trendline. </div>
<div style="text-align: justify;">
In this way, it needs other confirmations, to set up a short strategy. Let's look at the next trading sessions. If the bearish trend will be confirmed also in the short-term, the cross could test 122.68, the gap up and then 115,22 (see the trendlines). </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYltcx22QkGZ2p0Ds96KyLAwJspxMyI5BGHxdWvTnU7OHLTrIW7dTRRyWyy-VOacvzFJjwUNvkQNHKOFYCFsktBBu-t79717EXi5cHLppRZB1sbpeUvnw1Xsx4vMjQzaHRcQTeclbkWYc/s1600/tvc_39d04b98571c4cc1cbf5370c7ecd5d52.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYltcx22QkGZ2p0Ds96KyLAwJspxMyI5BGHxdWvTnU7OHLTrIW7dTRRyWyy-VOacvzFJjwUNvkQNHKOFYCFsktBBu-t79717EXi5cHLppRZB1sbpeUvnw1Xsx4vMjQzaHRcQTeclbkWYc/s400/tvc_39d04b98571c4cc1cbf5370c7ecd5d52.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiS1Atju1_9lWsYLDNX2-fi1QaaFDRFEPTgwLBtL_cCcmGmcPF5lq7_jfP3Z8VDB-JxKt2YNA7CNh2TyZmcd7deYZMDfP-X1al5yzFJjG2gZBiFfhKhQlM9xTMIskQ0d0bKTlW5vOqjZ5o/s1600/tvc_7569720dc152834f9205068c03518038.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiS1Atju1_9lWsYLDNX2-fi1QaaFDRFEPTgwLBtL_cCcmGmcPF5lq7_jfP3Z8VDB-JxKt2YNA7CNh2TyZmcd7deYZMDfP-X1al5yzFJjG2gZBiFfhKhQlM9xTMIskQ0d0bKTlW5vOqjZ5o/s400/tvc_7569720dc152834f9205068c03518038.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
With a closer look, the situation is the same: the bearish trend, the price levels highlighted by the yellow ellipses, a red candle that brokes the support, a test of the bullish trendline. </div>
<div style="text-align: justify;">
We can notice also the EMA cross (20, 100). The last one represents a sell signal that must be confirmed for the above reasons. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVgdlmHgkU-kTkLjM2glPMPIJOrFsGGjx_pES-De-uO-__apYCQiG1BtuLv28bYCEoOVIBFnOAWNtS3kjImBbih1PlyouRVTlOtRr3e1QiPJYZQl7wugGo43iDXibTQEDTCulgiWTiKu0/s1600/tvc_ca5b4523f7290b225c3634cdb8be0689.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="531" data-original-width="1299" height="162" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVgdlmHgkU-kTkLjM2glPMPIJOrFsGGjx_pES-De-uO-__apYCQiG1BtuLv28bYCEoOVIBFnOAWNtS3kjImBbih1PlyouRVTlOtRr3e1QiPJYZQl7wugGo43iDXibTQEDTCulgiWTiKu0/s400/tvc_ca5b4523f7290b225c3634cdb8be0689.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKSA6bQ80zJqzVOKxb9V28GSOlqFTUQy-hWr5wyXwICm6sgsUK3t0T3VmMJYHfjwFbzCStS-6pk5ziXEphRN_WHu_XQvFt4OZvLvoXQWa4WM5h0_EcLGrU3FG0Kn-5WsI_Ng3JoPxrPcc/s1600/tvc_c8526d656fd0ebb2b7da1858565409cc.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKSA6bQ80zJqzVOKxb9V28GSOlqFTUQy-hWr5wyXwICm6sgsUK3t0T3VmMJYHfjwFbzCStS-6pk5ziXEphRN_WHu_XQvFt4OZvLvoXQWa4WM5h0_EcLGrU3FG0Kn-5WsI_Ng3JoPxrPcc/s400/tvc_c8526d656fd0ebb2b7da1858565409cc.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
To conclude, for a valid short strategy, we need more information provided by the technical indicators. Otherwise, the last red candle could represent only a volatility exhaust and a rebound of the cross. For this purpose, look at the BB and at the green arrow. The cross is testing the supports in the short-term, even if the trend is bearish in the long-term.</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3xPeBSrVliNKi7XRCe-_5_34t2JG2Q1cvTVFbxQty7kdWEDdBtEfNcbsy_SgmiJTpKTcJcDERzK8OYSBI8KxdK3VxzBJwmi3mA4SyX6sER12QLBfQ7lrm8iTogBsYykAbiQ2qkq8h_iI/s1600/tvc_c3d056216e77fb5c99deb276a025a6af.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3xPeBSrVliNKi7XRCe-_5_34t2JG2Q1cvTVFbxQty7kdWEDdBtEfNcbsy_SgmiJTpKTcJcDERzK8OYSBI8KxdK3VxzBJwmi3mA4SyX6sER12QLBfQ7lrm8iTogBsYykAbiQ2qkq8h_iI/s400/tvc_c3d056216e77fb5c99deb276a025a6af.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-49405429018948418072019-02-21T22:39:00.001+01:002019-02-21T22:39:30.400+01:00GBP/USD : chart framework.<div style="text-align: justify;">
At a glance, we can notice some price levels. The last trend is bullish (confirmed also by the green candle), from 1.24 (see the bullish trendline). </div>
<div style="text-align: justify;">
There is a support at about 1.249 and another at about 1.27. This last one is important due to the fact that previously, it represented a resistance (in the year 2017). </div>
<div style="text-align: justify;">
Another price level is 1.32 : it is a resistance touched by the currency cross on October 2018 and in the year 2019 ; this resistance was touched also in the year 2017. </div>
<div style="text-align: justify;">
See the following chart, to better understand the framework. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHp-UTDacVf7Z9K_gQy9_WKphWeE2wxYBrHq6KeEY9cIECvteBJdiWOKDYh_ukxcDFLRyvdjlhwTT6LvoKWcPULG0zTy-1DiBVAtGuVT2L5gdI230ECVF1JFhn2GcWyEI6ViU8ddqgFlU/s1600/tvc_c047618e54099e91f8e650e0d31aaa07.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHp-UTDacVf7Z9K_gQy9_WKphWeE2wxYBrHq6KeEY9cIECvteBJdiWOKDYh_ukxcDFLRyvdjlhwTT6LvoKWcPULG0zTy-1DiBVAtGuVT2L5gdI230ECVF1JFhn2GcWyEI6ViU8ddqgFlU/s400/tvc_c047618e54099e91f8e650e0d31aaa07.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The FIBO retracements are very useful in order to fix target prices. The price level at 1.32 is far important. It represents the 50% FIBO level and the watershed between a bullish continuation (with the break of the upward resistance) and a bearish signal (reversal with the repulsion of the mentioned resistance). </div>
<div style="text-align: justify;">
Of course, to get a valid signal, we need more considerations. However, the price levels are pretty clear to set up a trading strategy. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkkZg05VsNIrcSzWcD_jZDB0Gr_l8sNHYGgLqqoKd-InvcE9uR-LcwMUtsBdqqeMeQOuGm3-OXKCyNZmVngKuO5LWJf9afSDmPwSew7dfzahDgPlChTwnVkCJqI9eoN7b2yqcrC342Zhs/s1600/tvc_678db2171203734606291e205ba53d51.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkkZg05VsNIrcSzWcD_jZDB0Gr_l8sNHYGgLqqoKd-InvcE9uR-LcwMUtsBdqqeMeQOuGm3-OXKCyNZmVngKuO5LWJf9afSDmPwSew7dfzahDgPlChTwnVkCJqI9eoN7b2yqcrC342Zhs/s400/tvc_678db2171203734606291e205ba53d51.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
With a closer look, the situation is the same. The long candle is bullish and other indicators seem to confirm the uptrend : the crossover of the stochastics ; the intersections of the EMA bundle (10, 20, 50) and the crossover of MACD and MOMENTUM (see the previous chart). </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBdUDwK_6byrVHmxTg9S94hvHVsXLVtKfhCleshqDWEpmNcp_jlpAVXeAHhSoCmLcvdnTf2DJqDaE0yRJ1abNokC4BTimrwS5WceCjIBQ5yfsPlqfuIfXO45Lahfoe0ldwuW2AxKEoo2g/s1600/tvc_3560738b43c721388e7ec2dba7b0e310.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBdUDwK_6byrVHmxTg9S94hvHVsXLVtKfhCleshqDWEpmNcp_jlpAVXeAHhSoCmLcvdnTf2DJqDaE0yRJ1abNokC4BTimrwS5WceCjIBQ5yfsPlqfuIfXO45Lahfoe0ldwuW2AxKEoo2g/s400/tvc_3560738b43c721388e7ec2dba7b0e310.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
With the last trading sessions, the bullish signal of the green candle would seem muffled (due to the shadows of the red candles, circled area). Anyway, let's look at the updates. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhDlRQHJsPv3rJVzttmrukb-66mVhHkHxmz-BoP2JH10o8msSOP2CYOwZC7KiYdewuyKyxSU0yfGzPEPZ6lGU46bO9WNoG9NEeUA9UyFXTw8_-XTpJs8vmOZty1b8SNneDhabH8LEnTB4A/s1600/tvc_cd991b0badd6785ef9202bda0ffe18ca.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhDlRQHJsPv3rJVzttmrukb-66mVhHkHxmz-BoP2JH10o8msSOP2CYOwZC7KiYdewuyKyxSU0yfGzPEPZ6lGU46bO9WNoG9NEeUA9UyFXTw8_-XTpJs8vmOZty1b8SNneDhabH8LEnTB4A/s400/tvc_cd991b0badd6785ef9202bda0ffe18ca.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-21702527248966354732018-12-09T17:02:00.000+01:002018-12-09T17:02:33.701+01:00IMA S.p.A. : chart update.<div style="text-align: justify;">
With a weekly chart, we can get an overview of the stock.</div>
<div style="text-align: justify;">
We can notice the break of the uptrend (mid/long-term): see the dotted line. Now, we are at the test of the 61.80% FIBO level that it is also the previous resistance (see the rectangle). The last one could represent a new support (maybe, let's look at the next trading sessions). </div>
<div style="text-align: justify;">
It is interesting also to see the volatility exhaust, marked by the BB: the stock is on the lower side of the band and it could be a rebound (see the previous ones and the yellow circled area, from overbought to oversold and vice-versa, of the RSI). However, it is too early to speak about a trend change for the above reasons. It needs other confirmations. According to me, at now, it is only a break in the downtrend.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<span id="goog_1026933176"></span><a href="https://www.blogger.com/"></a><span id="goog_1026933177"></span><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgF8dilZk6863634_FaVa514sTgG7ZcoBmLWHK3__Rr4LcKY2SSBPStvGuAsStUczEGAm04s_g6GkzZ-0ENQIQctvyuTaTz_CrCoeGFclw5bvf4nIWoR76Cx9dvpzav1-fU3HrPOf-TZWc/s1600/tvc_768eb60bb9f11582868997d8654e7bce.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="581" data-original-width="1299" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgF8dilZk6863634_FaVa514sTgG7ZcoBmLWHK3__Rr4LcKY2SSBPStvGuAsStUczEGAm04s_g6GkzZ-0ENQIQctvyuTaTz_CrCoeGFclw5bvf4nIWoR76Cx9dvpzav1-fU3HrPOf-TZWc/s400/tvc_768eb60bb9f11582868997d8654e7bce.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
It is premature to buy on the basis of technical conditions (see the MOMENTUM, MACD and EMA bundle 20-50-100) although it can be a good price on the basis of fundamental analysis (see the previous article, <a href="https://michelecarollo.blogspot.com/2018/11/ima-spa-relative-valuation.html">https://michelecarollo.blogspot.com/2018/11/ima-spa-relative-valuation.html</a>, "<span style="background-color: white; font-family: Verdana, Geneva, sans-serif; font-size: 13.2px;">The price still could go down for the reason that the trend is clearly bearish. However, the current market price is beginning to be interesting.").</span></div>
<div style="text-align: justify;">
<span style="background-color: white; font-family: Verdana, Geneva, sans-serif; font-size: 13.2px;"><br /></span></div>
<div style="text-align: justify;">
<span style="background-color: white; font-family: Verdana, Geneva, sans-serif; font-size: 13.2px;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQLSPGvKNgUHAK49y7vQ7C3UDtUi3c4BjfNGyJhbgrn33LBRL_wkyECuhh5oreGafrTcgXIznByKerNN2T89T0WXbRZOpNXfmhLzR9VMwGLMUDcNYSFoTxyIQ2Pb-MBFkECzRNpTJLtjc/s1600/tvc_cfa50f842c7e700a9157d59fd97c685c.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="581" data-original-width="1299" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQLSPGvKNgUHAK49y7vQ7C3UDtUi3c4BjfNGyJhbgrn33LBRL_wkyECuhh5oreGafrTcgXIznByKerNN2T89T0WXbRZOpNXfmhLzR9VMwGLMUDcNYSFoTxyIQ2Pb-MBFkECzRNpTJLtjc/s400/tvc_cfa50f842c7e700a9157d59fd97c685c.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<span style="background-color: white; font-family: Verdana, Geneva, sans-serif; font-size: 13.2px;"><br /></span></div>
<div style="text-align: justify;">
The view is the same if we use a smaller time frame, like a daily chart: see the following image. </div>
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<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUZLUVa0VhTFePM6smg69nU1UbgKqHqtiMqf6ozVkniUnLlOsaT5LVJp1Q3zR9mMtRPo_MAavPskkOvjx9Ipe3vd7fwO-G6oGMgzPHTV292d2G4rx0dCWZSgNL9jTSSCtKueNY0aTsiwQ/s1600/tvc_b885b2326fdc26fa795589806e2b522e.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="581" data-original-width="1299" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUZLUVa0VhTFePM6smg69nU1UbgKqHqtiMqf6ozVkniUnLlOsaT5LVJp1Q3zR9mMtRPo_MAavPskkOvjx9Ipe3vd7fwO-G6oGMgzPHTV292d2G4rx0dCWZSgNL9jTSSCtKueNY0aTsiwQ/s400/tvc_b885b2326fdc26fa795589806e2b522e.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
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<br /></div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-42188243071176181432018-11-18T15:15:00.001+01:002018-11-18T15:15:57.703+01:00IMA S.p.A. : relative valuation (historical market multiples).<div style="text-align: justify;">
With regard to the valuation, it is interesting to consider also its historical market multiples.</div>
<div style="text-align: justify;">
However, it needs to mark the following considerations :</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
</div>
<ul>
<li>Every time period has its own market multiples, due to the macroeconomics factors and to the economic cycle ; in this way, the comparison term loses its value ; </li>
</ul>
<ul>
<li>The market anticipates the events and prices the expectations ; for this reason, the past valuations had always incorporated the whole scenarios ; the valuations and future market multiples are more important ; </li>
</ul>
<ul>
<li>Thirdly, with regard to the litterature, the relative valuation is composed always with a peer analysis, with a focus on the expectations of the sector (see the link, <a href="https://michelecarollo.blogspot.com/2018/11/ima-spa-relative-valuation.html">https://michelecarollo.blogspot.com/2018/11/ima-spa-relative-valuation.html</a>). </li>
</ul>
<div>
<br /></div>
<div>
Here, we have the historical market multiple P/S. I used this market multiple with the aim to reduce the bias : the results at the top of the income statement are less influenced by several factors. </div>
<div>
We can notice that the last multiples are higher than the past multiples but we must consider the previous paragraphs, of course.</div>
<div>
Then, the market valuation tends to assign higher multiples to a growing company, over time, like IMA S.p.A.</div>
<div>
In this way, it is advisable to consider also a median of the multiple or a weighted average (the past prices are less important than the current prices). </div>
<div>
The expected market multiples (the yellow columnes) are substancially lower than the mean, median and weighted average (black and dashed lines in the chart). The gap is not so wide (that confirms the <a href="https://michelecarollo.blogspot.com/2018/11/ima-spa-relative-valuation.html">previous valuation</a>). </div>
<div>
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<div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbT6PHL6X6eWIuOYi_qU6W6XhoXxvVS6HDgWaMbm_QQaWAm5sD6dB8HNcsOyUZVIGMQPiutVDLHpR9qMiyKz5hYktaVtGkbOaNTGrho2xhR-X72BbKe6L_WPwivMqpQMbv2cp_go_xISc/s1600/IMA.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="336" data-original-width="1085" height="122" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbT6PHL6X6eWIuOYi_qU6W6XhoXxvVS6HDgWaMbm_QQaWAm5sD6dB8HNcsOyUZVIGMQPiutVDLHpR9qMiyKz5hYktaVtGkbOaNTGrho2xhR-X72BbKe6L_WPwivMqpQMbv2cp_go_xISc/s400/IMA.png" width="400" /></a></div>
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Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-19909883844970404802018-11-05T22:53:00.000+01:002018-11-06T18:52:56.893+01:00IMA S.p.A. : relative valuation. <div style="text-align: justify;">
Here we have a relative valuation of IMA S.p.A. It operates in the industrial machinery and equipment, like the peers of the sample. In particular, its business is focused on the packaging industry, through the segment lines : tea, food and other ; pharmaceutical sector. </div>
<div style="text-align: justify;">
In order to select the peers, I considered the following requirements : similar business and geographical area and similar size (revenues or market cap as the proxy of the size), having regard to the differences, like the profitability, the growth, the risk and the financial structure (in this way, I adjusted the market multiples, appropriately or I considered the difference as a discount or as a premium in the valuation ; about the financial position, the differences are very small).</div>
<div style="text-align: justify;">
I used a leading market multiple (expected results in the year 2018, 2019, 2020, data source : <a href="https://www.marketscreener.com/">www.marketscreener.com</a>). I also considered the management assumptions, expectations and business plans.<br />
<br />
Let's look at the market multiples, in the following table.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9t9xiCQTyH6kAhEmcdV4i4-f9uOpDuqqJW3Gpx-f-hByN2LdR6NrvX_xnh00bVxGAMf1xJY9j3S4u-Dia2bSpnmzBx2REvqd5FZVmcpa6B6Fbq47ZEnPKU8J-x7kdODTP43FUNW7X-wg/s1600/I.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="180" data-original-width="464" height="155" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9t9xiCQTyH6kAhEmcdV4i4-f9uOpDuqqJW3Gpx-f-hByN2LdR6NrvX_xnh00bVxGAMf1xJY9j3S4u-Dia2bSpnmzBx2REvqd5FZVmcpa6B6Fbq47ZEnPKU8J-x7kdODTP43FUNW7X-wg/s400/I.png" width="400" /></a></div>
<br />
It needs to consider that about the equity story and size GIMA TT ("recent history") seems to be a a distortion compared to the other firms. It can be interesting, regarding its similarity to IMA, however, it is more advisable to exclude it from the peers group.<br />
Then, we can calculate the mean and the median, respectively :<br />
<br />
EV/EBITDA (10.08 | 9.44) ; P/S (1.60 | 1,70) ; P/E (18,45 | 17)<br />
<br />
At a glance, we can notice the discount of IMA S.p.A, apart price to earnings.<br />
<br />
Secondly, it is more useful to link the market multiples to the fundamental variables (profitability and growth, above all). In this way, see the next table.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsjlG0lC_MUPtWCu3wMofNh0Dtv4cPrZCkPYvVRkMyyL4iAI_8xlhn7TZu-cprbn2ZsHYzPRnkXhhhQYWkCZKsWTp1irdTg_XkGsANCuWxK1qtPL19-KU4A3GoMwtqp32Qm3ANsMNW7qU/s1600/II.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="416" data-original-width="387" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsjlG0lC_MUPtWCu3wMofNh0Dtv4cPrZCkPYvVRkMyyL4iAI_8xlhn7TZu-cprbn2ZsHYzPRnkXhhhQYWkCZKsWTp1irdTg_XkGsANCuWxK1qtPL19-KU4A3GoMwtqp32Qm3ANsMNW7qU/s400/II.png" width="371" /></a></div>
<br />
We can calulate the mean and median, excluding GIMA TT again and IMA, for obvious reasons.<br />
<br />
EBITDA margin (15.72% | 18.12%) ; EBIT margin (12.55% | 15.03%) ; NI margin (8.71% | 10.40%)<br />
<br />
CAGR EBITDA (8.94% | 7.58%) ; CAGR revenues (6.66% | 5.94%) ; CAGR NI (12,85% | 12.74%)<br />
<br />
Substantially, IMA marginality is slighy lower compared to the sector profitability ; however, the growth is rather higher.<br />
<br />
Finally, let's put the variables together, thanks to a regression line.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghasYil97_mTCJ5Io3jFmeBheG-fSPJ801pvwusq6BcEzoaVMdGyu4k23TZkN2iQXjo-x8pm0gNZgU5IfXOQRkj9IIXu_Lbh0XibKLuOTQmRsE525Kmm6fOHlRUQNP-gSxSMTHVBilMG0/s1600/a.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="565" data-original-width="867" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghasYil97_mTCJ5Io3jFmeBheG-fSPJ801pvwusq6BcEzoaVMdGyu4k23TZkN2iQXjo-x8pm0gNZgU5IfXOQRkj9IIXu_Lbh0XibKLuOTQmRsE525Kmm6fOHlRUQNP-gSxSMTHVBilMG0/s400/a.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Market Multiples (Y) vs Profitability (X)</td></tr>
</tbody></table>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-QyD7DTKc82b-Jj-GxjE1DKANwpjmS8D79PTMlwUejSMqiw33TqgN3z96nzLLuG3GL0YCxUpgKt3SvTUrR1eO7IDBK3D06uJ6hLixchhJ9jwj_U0ZXBkNGMXkKT0gKRe9GbIsrUOtraY/s1600/b.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="565" data-original-width="867" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-QyD7DTKc82b-Jj-GxjE1DKANwpjmS8D79PTMlwUejSMqiw33TqgN3z96nzLLuG3GL0YCxUpgKt3SvTUrR1eO7IDBK3D06uJ6hLixchhJ9jwj_U0ZXBkNGMXkKT0gKRe9GbIsrUOtraY/s400/b.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Market Multiples (Y) vs Growth (X)</td></tr>
</tbody></table>
<br />
In the two charts, the intercept is not considered because it is not important, in a statistical point of view (statistical significance). However, the angular coefficient is good. The R-squared is excellent, in the following order (from the lowest to the highest) : P/E regression, EV/EBITDA regression and P/S regression.<br />
<br />
So, we can determine the fair value of IMA and its premium or discount. In other words, its intrinsic market multiple.<br />
<br />
<b><u>margins</u></b><br />
FV (I) = P/E = 181,61*7,30% = 13,25 <br />
premium : +36,7%<br />
<br />
FV (II) = EV/EBITDA = 60,513*15,65% = 9,47 <br />
discount : -7,82%<br />
<br />
FV (III) = P/S = 12,88*12,85% = 1,65<br />
discount : -20,24%<br />
<br />
<b><u>growth</u></b><br />
FV (IV) = P/E = 120,66*17,54% = 21,16 <br />
discount : -14,4%<br />
<br />
FV (V) = EV/EBITDA = 100,75*12,15% = 12,24 <br />
discount : -28,7%<br />
<br />
FV (VI) = P/S = 23,794*7,14% = 1,7 <br />
discount : -22,3%<br />
<br />
Finally, we can conclude than the discount is higher (as I said) with the growth. With the margins, the discount is smaller and we have a premium with the P/E regression. At a glance, IMA is traded at a slighty lower market price compared to its hypothetical fair value. Of course, it does not represent a safety margin, at the moment. The price still could go down for the reason that the trend is clearly bearish. However, the current market price is beginning to be interesting.</div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-47559081101489998812018-10-20T19:19:00.001+02:002018-10-20T19:19:41.658+02:00Servizi Italia S.p.A. : plain DCF and target price. <div style="text-align: justify;">
In the following image, we have an example of DCF valuation. </div>
<div style="text-align: justify;">
The firm is Servizi Italia S.p.A. The valuation date was August 18, 2016 and the target was 6.06 EURO (plus a range with regard to the fair value, +/-5%). The target was achieved on November 23, 2017 (in this way, the holding period was about one year and 3 months or 462 days, exactly). For this purpose, consult the following link and see the second one image : </div>
<div style="text-align: justify;">
<a href="https://twitter.com/search?l=&q=DCF%20from%3Amichele_finance&src=typd&lang=en">https://twitter.com/search?l=&q=DCF%20from%3Amichele_finance&src=typd&lang=en</a></div>
<div style="text-align: justify;">
The upside was about +73%, with regard to the current market price at the time of the coverage :</div>
<div style="text-align: justify;">
[6.06 - 3.50] / 3.50 = + 73.14 %</div>
<div style="text-align: justify;">
<br /></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIfNAkMTNz_J6L24cyDw3S9Cw-mexTdPc4ypNKAD6dhnAAyYEyLFdQ-7MBXpWuPh97j_gdjZLyn8pFtBX6Ramr7nc1xqJNrArBTsJG8cjaIelelqmgk3mrEqIDpObiRAkTpOzqTv2GzH8/s1600/SRI.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="900" data-original-width="1179" height="305" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIfNAkMTNz_J6L24cyDw3S9Cw-mexTdPc4ypNKAD6dhnAAyYEyLFdQ-7MBXpWuPh97j_gdjZLyn8pFtBX6Ramr7nc1xqJNrArBTsJG8cjaIelelqmgk3mrEqIDpObiRAkTpOzqTv2GzH8/s400/SRI.png" width="400" /></a></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Let's look at the assumptions of the model :</div>
<div style="text-align: justify;">
<ol>
<li>The revenues were the proxy of the model : it means that all the variables depended directly on sales as a percentage.</li>
<li>For the estimation of the revenues of the next three years (2016-2017-2018), I assumed a CAGR of about 3% (the business of the firm is quite steady) ; I looked also at the trend of the past three years. </li>
<li>For the other items (D&A, NFC, net income, NWC, capex), as I said previously, I assumed a percentage of the revenues : 20%, 1.5%, 5%, 0.5%, 20%. I looked also at the past trend and I considered the evolution of the sector and of the firm, in the next years (for the formula, consult the notes). </li>
<li>For the estimation of the ERP and tax rate, I used the data source of A. Damodaran (ITA).</li>
<li>For the risk-free rate, I assumed the weighted average yield of BTP 10 years.</li>
<li>For the estimation of the beta, I used the regression between FTSE-mib and Servizi Italia with a time frame of 5 years and with monthly returns (I added a spread of 0.10 to consider the additional risk, due to the reduced liquidity of the stock). </li>
<li>For the cost of debt and for the financial structure, see the notes.</li>
<li>For the growth rate (g), I assumed a conservative rate of 1% (see the litterature). </li>
<li>With regard to the calculation of the EV and of the fair value, see the following formula and consult the notes:</li>
</ol>
<div>
EV=[FCF<span style="font-size: xx-small;">16</span>/(1+wacc)^1]+[FCF<span style="font-size: xx-small;">17</span>/(1+wacc)^2]+[FCF<span style="font-size: xx-small;">18</span>/(1+wacc)^3]+[FCF<span style="font-size: xx-small;">18</span>*(1+g)/(wacc-g)]*[1/(1+wacc)^3]</div>
<div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXV2r4DsU6MBSFFjVh-5RHMyG3Bqjwh6fgarJNL9-fMTEqnDDUAmHUUxFMZmFCDcYDUbd9PCdU6Aok3qltlKMYlsSI_xVVo03x1uEI8LgcG3eshsJHBrvhr5LoV7IDvRDV4INTi3zWHuE/s1600/tvc_8457caef9fbeb863308fed1304f265e4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="581" data-original-width="1299" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXV2r4DsU6MBSFFjVh-5RHMyG3Bqjwh6fgarJNL9-fMTEqnDDUAmHUUxFMZmFCDcYDUbd9PCdU6Aok3qltlKMYlsSI_xVVo03x1uEI8LgcG3eshsJHBrvhr5LoV7IDvRDV4INTi3zWHuE/s400/tvc_8457caef9fbeb863308fed1304f265e4.png" width="400" /></a></div>
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Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-37704548775980847762018-10-14T14:58:00.000+02:002018-10-14T14:58:07.955+02:00INFINEON TECHNOLOGIES : chart framework.<div style="text-align: justify;">
From a uptrend beginned in the first half of the year 2013, the stock showed a correction in the year 2018. The chart framework is highlighted by the two trendlines (we speak about a long-term period), in particular by the break of the second one (see the gray circled area). </div>
<div style="text-align: justify;">
The trend change is also marked by the crossing of the two EMAs (fast, 100 periods and slow, 200 periods). The slope of the EMAs shows the market direction. </div>
<div style="text-align: justify;">
If we look at the FIBO retracements, we got another confirmation of that picture.</div>
<div style="text-align: justify;">
There is the break of the first FIBO level (23.60%, at 20.31 EURO). Then, we are at the test of the second FIBO level (38.20%, at 17.22 EURO). See the yellow circled areas. </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw7leai1eiDt_1iDP5Hb0nCdE3TyuBe3nMAn5pykJM08Cqi37sE9ZcVXqUVKc1orLWAtjb0chlZ3E9ryqrUD8arhnH3ew4kW9CRXYRXmg7Wne-LWMJT2b3t1Cl_L8xEjdPOgPpOFDx0fc/s1600/tvc_51dae42b766271a489a83936ae503293.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="581" data-original-width="1299" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw7leai1eiDt_1iDP5Hb0nCdE3TyuBe3nMAn5pykJM08Cqi37sE9ZcVXqUVKc1orLWAtjb0chlZ3E9ryqrUD8arhnH3ew4kW9CRXYRXmg7Wne-LWMJT2b3t1Cl_L8xEjdPOgPpOFDx0fc/s400/tvc_51dae42b766271a489a83936ae503293.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
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<div style="text-align: justify;">
The previous chart shows the graphic framework at a glance. We can reduce the objective with the aim to closely analyze the situation, in this way. </div>
<div style="text-align: justify;">
The following chart shows an excess market. We can notice it trough the excess volatility from the BBs, the crossing of the two lines of the MACD (MACD and signal line) and the crossing of the RSI line, from overbought to a hypothetical oversold. How long this trend change/excess market will last ? It needs to monitor the next trading sessions to get a response (see also the test of the above named FIBO level). </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEZeYJToJOF7IV5LK_LxlAwZd69nLkafL33d7o5BNTsUzA-dzjEIcSXPTfOVmrd5G071qeR0s85OMqc0RpUEr2sdIxdgg_rKsUDUtMRUvyYUmfpVkLr9dVRoj0btqqtrJmnyyqtwufnXs/s1600/tvc_f38e3b2cfba7ae9f0120c11e54887677.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="581" data-original-width="1299" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEZeYJToJOF7IV5LK_LxlAwZd69nLkafL33d7o5BNTsUzA-dzjEIcSXPTfOVmrd5G071qeR0s85OMqc0RpUEr2sdIxdgg_rKsUDUtMRUvyYUmfpVkLr9dVRoj0btqqtrJmnyyqtwufnXs/s400/tvc_f38e3b2cfba7ae9f0120c11e54887677.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
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<div style="text-align: justify;">
Finally, with a monthly time frame, we come to the same conclusions : crossing of the zero line from above to below (MOM) and crossing of the level 80 (MFI) ; see the yellow ellipses, in this way.</div>
<div style="text-align: justify;">
The structure of the PSAR also shows the trend change : in the bullish trend the slope is very different from the last bearish trend. </div>
<div style="text-align: justify;">
As I said previously, it needs to look at the next trading sessions to understand if the current bearish trend is still valid or not. </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF2hv4OEr3h7L0qnzxLBtgCsoPzxrIv_YoqY3IMaGNZgH4s5bxEmJ5nZQWp-DQ0v-VyfmsoUw9-xwvX3S-7Zkl_VTE_lU8omAGOx1uPMMG2scJ03cWNpSBAME4gDhlZPLnYonvBKPcqsA/s1600/tvc_5a66ee60f5ca7bf023616d39de108566.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="580" data-original-width="1299" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF2hv4OEr3h7L0qnzxLBtgCsoPzxrIv_YoqY3IMaGNZgH4s5bxEmJ5nZQWp-DQ0v-VyfmsoUw9-xwvX3S-7Zkl_VTE_lU8omAGOx1uPMMG2scJ03cWNpSBAME4gDhlZPLnYonvBKPcqsA/s400/tvc_5a66ee60f5ca7bf023616d39de108566.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
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<div class="separator" style="clear: both; text-align: center;">
</div>
<div style="text-align: justify;">
Of course, there is no fundamental consideration that would clearly complement the analysis, especially with regard to a long-term perspective. </div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-47996844901499536592018-08-19T11:06:00.001+02:002018-08-19T14:16:19.598+02:00EUR/CHF : chart framework.<div style="text-align: justify;">
From a bullish trend, the currency cross began a bearish trend (May 2018). The parallel channel was broken and then also the bullish TL (long and short-term). We can notice a volatility exhaust (see the BB) highlighted by the overbought and by the oversold of the RSI (see the yellow ellipses). </div>
<div style="text-align: justify;">
The current bearish trend is still valid : however, if we look at the following chart, there is a rebound from the low at 1.127. As I said, it represents just an exhaust of the excess market. To consider it a change of trend, it needs other confirmations in the following trading sessions and it needs a test of area 1.145 (the previous support). </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiG8Nv9UggPgDfW9Eom47m0Jo_qRbrUkvfxU43dp1mo2tB8VpU1MPsflQfydoHbae7PQ0DR1WVYLCXoK5QGAquB2j9lOYkWndqAD7aWKVyNuXz0DhPF50T7mqriQe-I14zK5N1ZqgwmV5w/s1600/tvc_fe0128f0e45c6f3ce84036421546b8b1.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="586" data-original-width="1299" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiG8Nv9UggPgDfW9Eom47m0Jo_qRbrUkvfxU43dp1mo2tB8VpU1MPsflQfydoHbae7PQ0DR1WVYLCXoK5QGAquB2j9lOYkWndqAD7aWKVyNuXz0DhPF50T7mqriQe-I14zK5N1ZqgwmV5w/s400/tvc_fe0128f0e45c6f3ce84036421546b8b1.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<br /></div>
<div style="text-align: justify;">
Let's look at the FIBO retracements : the main references are 1.06 (100%), 1.13 (50%) and the previous low, 1.14 (38.20%), 1.16 (23.60%), 1.20 (0%). The mentioned references are important to set a trading strategy, bearish or bullish. See the following chart.<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSlzygC9GmRFACLxkNzs-phYZyjhsdXv35yj3-n9mzcTKJ_QvBBiLhElnynYst6OBlJjEhwNl2iqdPNi9o2F4v4d3anmDluc_AVH5mArzqdECicsDU1eEKwgRdmR96SEQy_dPL-Qgu0Vs/s1600/tvc_836a8a3eee7db9392245321a194b4094.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="586" data-original-width="1299" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSlzygC9GmRFACLxkNzs-phYZyjhsdXv35yj3-n9mzcTKJ_QvBBiLhElnynYst6OBlJjEhwNl2iqdPNi9o2F4v4d3anmDluc_AVH5mArzqdECicsDU1eEKwgRdmR96SEQy_dPL-Qgu0Vs/s400/tvc_836a8a3eee7db9392245321a194b4094.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<br />
If we look closely, we have two options :<br />
<br />
<ol>
<li>We can anticipate the market moves (there is a higher risk but with a higher expected return due to our prior involvement to the price rebound) ; in other words, we right away consider the overcoming of the MOMENTUM above the zero line, the intersection of the MACD and of the signal line and the test of the support at 1.145 ;</li>
<li>We don't anticipate the market moves (the risk is lower as the expected return) ; in other words, we wait for the mentioned technical signals and we wait for other confirmations in the following trading sessions (see the red arrows). </li>
</ol>
<div>
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1ea3XgPzziaEtHkhyZ4Z4IQxl_HH9W1qKIc0OTw3iiZbDNnyaGkt4mK9RP8XTsSYh8THZuIMhTgyBoIUMT9JO66LbaXUOstOUfQQtTnVfUPO18aAxT8CspV16DbZMbtG6TBPPBWev8lI/s1600/tvc_17843bab7b040f42d6f9885d46422c23.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="586" data-original-width="1299" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1ea3XgPzziaEtHkhyZ4Z4IQxl_HH9W1qKIc0OTw3iiZbDNnyaGkt4mK9RP8XTsSYh8THZuIMhTgyBoIUMT9JO66LbaXUOstOUfQQtTnVfUPO18aAxT8CspV16DbZMbtG6TBPPBWev8lI/s400/tvc_17843bab7b040f42d6f9885d46422c23.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div>
<br />
Finally, at a glance, with a weekly timeframe, we can notice that : the EMA bundle (20, 30, 50) shows the direction (lateral trend, uptrend, bearish trend), see also the intersection of the light blue line, of the red line and of the yellow line (red ellipses) ; the structure of the Parabolic SAR shows the market direction, too. </div>
<div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOv62rRy0y4I2BXRqlFXSF9G2bQKzEqHAz4S_2v_Bf_Vp4iLREeX3NXpYFUDgxOntOcz67d2rUUWv3svCE3untOhW5cJTPEO69naVlmgfXfI8D5R-zFKQhteAY8D1enM5O8e9xi4d_lpU/s1600/tvc_e6ebddbcc0eccb377fc9f4659fb7d0df.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="586" data-original-width="1299" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOv62rRy0y4I2BXRqlFXSF9G2bQKzEqHAz4S_2v_Bf_Vp4iLREeX3NXpYFUDgxOntOcz67d2rUUWv3svCE3untOhW5cJTPEO69naVlmgfXfI8D5R-zFKQhteAY8D1enM5O8e9xi4d_lpU/s400/tvc_e6ebddbcc0eccb377fc9f4659fb7d0df.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
</div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-91347192148727778912018-07-28T20:31:00.001+02:002018-07-28T20:31:22.172+02:00EUR/GBP : chart framework.<div style="text-align: justify;">
From a bullish trend (beginning in the end of the year 2016 and lasted until september, in the year 2018), the cross started a lateral trend. This is showed by the following chart where the uptrend is highlighted by the trendline and by the support lines and by the resistance lines (it means the main references : 0,83 and 0.93 ; 0.86 and 0.89). </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-DVLqvYg39hINUrO3OW0vjY9Cof-tJsRm3kyCogBaYZ3hcBs6Fy6r7xBAqgDNN6OkuaPbxuCg305Ix_epXetTFCQgW2CvhBWzVebFiMh_gmdMqwtgcaXaSU57jhhiIym84dANHzPiIls/s1600/I.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="590" data-original-width="1299" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-DVLqvYg39hINUrO3OW0vjY9Cof-tJsRm3kyCogBaYZ3hcBs6Fy6r7xBAqgDNN6OkuaPbxuCg305Ix_epXetTFCQgW2CvhBWzVebFiMh_gmdMqwtgcaXaSU57jhhiIym84dANHzPiIls/s400/I.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
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<div style="text-align: justify;">
We get the same view if we use a different time frame, for example a month. The monthly time frame shows the chart framework in a better way for the reason that it provides a general overview. </div>
<div style="text-align: justify;">
We can notice the same references and then at now we can notice that the price is testing the resistance area at about 0.89. This price level is important because it represents also both the closing and the opening price of the previous green candle and of the previous red candle (see the circled area) : there was a price retracement and a volatility exhaust ; the green candle represented a long upper shadow candle ; in other words, at the end, the sellers prevailed over the buyers. </div>
<div style="text-align: justify;">
The BB are emblematic, in this way : see the median line compared to the price and see the light blue lines compared to the price. </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhaZcX-pcNO3jEsaRiXH6y2WuTx2tR0BAz46B6mzzI2s-h_A82UFyIx11pKBLLSP-LhFAL9uc4ZEoQynXY7lRsfjVwOVZzZR2ebg1XGnC3isGS-cJaNnkz4J9mNirK9CLBEz3DdECHj7H0/s1600/II.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="590" data-original-width="1299" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhaZcX-pcNO3jEsaRiXH6y2WuTx2tR0BAz46B6mzzI2s-h_A82UFyIx11pKBLLSP-LhFAL9uc4ZEoQynXY7lRsfjVwOVZzZR2ebg1XGnC3isGS-cJaNnkz4J9mNirK9CLBEz3DdECHj7H0/s400/II.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
We have a confirmation of the trade change (bearish - bullish - lateral trend) also by the indications provided by MACD : we can notice the intersection of the yellow and red line (MACD and signal line) at the time of the overcoming of the zero line (see the light blue histograms), from the bottom upwards ; symmetrically, from the trend change bullish-lateral, from the top downwards. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx7aIlbelZcWCf1-knQJ0fjvR29QCvAHTeuhnZmf75DYy8or00qdBfUVDF6lwUw6hVmf82xMzQEsPr80e79CPnqTxBrnmntpJmDgQFTV0ANlg387yr5WCeYo87MMSMDYRF4q3pxaTKY8g/s1600/III.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="590" data-original-width="1299" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx7aIlbelZcWCf1-knQJ0fjvR29QCvAHTeuhnZmf75DYy8or00qdBfUVDF6lwUw6hVmf82xMzQEsPr80e79CPnqTxBrnmntpJmDgQFTV0ANlg387yr5WCeYo87MMSMDYRF4q3pxaTKY8g/s400/III.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Lastly, the EMA bundle shows the market direction : the following chart shows the slope of the EMA bundle where the trend is bullish and it shows the lack of slope of the EMA bundle where the trend is lateral ; then, the distance between the exponential moving averages is more marked for obvious reasons, in the uptrend (in this way, the EMA bundle provides a useful indication). </div>
<div style="text-align: justify;">
The RSI shows the overbought and the oversold, in the levels of 70 and 30, respectively, as usual : the passageway through the two areas marks the change of trend in the chart, inevitably.<br />
Of course, as I said previously, it needs to pay attention to the test of the resistance area at about 0.89.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJAqRBkT77u9BcJclFcuScevZHQaN6wmoSMBu2ra8CDJjtwl7QkCf1LFGxynDzIMJ07XgBF5lzsop5vLx27DRGN2FX31x1PC5YrIpp7s867JVsZakFZQE_YThCEANi5i88PupOEtHEuzE/s1600/IV.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="590" data-original-width="1299" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJAqRBkT77u9BcJclFcuScevZHQaN6wmoSMBu2ra8CDJjtwl7QkCf1LFGxynDzIMJ07XgBF5lzsop5vLx27DRGN2FX31x1PC5YrIpp7s867JVsZakFZQE_YThCEANi5i88PupOEtHEuzE/s400/IV.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
</div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-517019685457547552018-07-01T11:05:00.000+02:002018-07-01T13:46:28.436+02:00"Average down" strategy : a path to disaster. <div style="text-align: justify;">
The strategy describes the process of buying additional shares at lower prices compared to the original purchase price. The aim is the following : it brings the average price that we've paid for all the shares down. It can be a discount but just apparently. In this way, in my opinion, that is the only reason that drives the investor to do it. </div>
<div style="text-align: justify;">
It a somewhat obsolete technique and personally, I should not consider it a strategy. Against this background, it is just a state of mind and a mechanical process, without logic. </div>
<div style="text-align: justify;">
Of course, the disadvantages are greater than the benefits. The reasons are the following :</div>
<div style="text-align: justify;">
</div>
<ul>
<li>With repeated purchases of the same financial asset, we increase the risk of the portfolio : there is an excessive exposure of the portfolio, focused on the same stock. This is in contrast with a proper diversification principle ;</li>
</ul>
<ul>
<li>The process involves the purchase of additional shares as the stock price goes down ; in this way, we are purchasing an asset for which the trend is bearish, clearly. A trader should follow the trend. We should increase the exposure with the uptrend and with strong fundamentals. At least, we should buy with clear reversal signals and respecting a logical investment plan ;</li>
</ul>
<ul>
<li>At the end of the process, the investor obtained the following result : his portfolio is composed by a huge amount of shares of the same asset and if he reduced the loss (due to the lower average purchase price), on the other, his recovery rate (it means the percentage upside required to get the feed capital) is always higher in absolute terms than the current loss. This is especially true the more the final purchase price is lower than the original purchase price. In other words, the more the stock performance worsened. The following table explains the situation. </li>
</ul>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvOKcR37q-xYQPZYBaL4fZCkr1Z8Pngmz2U0IBwaTdWwDl66VS-H1nIpOvIvN9W9PJ6ZkLUSAUHL3e-BIYEDEeEqu6JBM7mrFdFXmhMf7JPh8OcFA2a3Hg2hC2v6g9J2gBHXRJk07zO6I/s1600/IMAGE.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="301" data-original-width="1031" height="116" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvOKcR37q-xYQPZYBaL4fZCkr1Z8Pngmz2U0IBwaTdWwDl66VS-H1nIpOvIvN9W9PJ6ZkLUSAUHL3e-BIYEDEeEqu6JBM7mrFdFXmhMf7JPh8OcFA2a3Hg2hC2v6g9J2gBHXRJk07zO6I/s400/IMAGE.png" width="400" /></a></div>
<div>
</div>
<div style="text-align: justify;">
We are assuming that the trend is bearish, of course. There are neither broker commissions nor financial fees, for simplicity. Then, the multiple purchases are of a same amount. </div>
<div style="text-align: justify;">
With the multiple purchases, we bring the average price down, compared to the initial price and with regard to the situation without subsequent purchases. However, we can notice that the recovery rate is always higher than the loss percentage (in absolute value). Obviously, the gap is higher without subsequent purchases.</div>
<div style="text-align: justify;">
Nevertheless, it is reductive to focus on it : we should necessarily consider the higher exposure and risk. Then, with a proper investment plan, we should have cutted the losses and the purchase price at 0,50 EUR would have never exist (and the same for the lower prices). With the respect of the stop loss and of the target price, we really reduce the risk and we really build a proper trading strategy. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The chart below shows what I said. Gain/loss % is better than Stock performance (equal to the gain/loss % without multiple purchases). Recovery rate (**) > Recovery rate (*). Recovery rate (**) > ABS (Stock performance) and Recovery rate (*) > ABS (Gain/loss %). </div>
<div style="text-align: justify;">
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<div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlprGgHeJmw02qxf-Kggd40wOJ2DEMtKOrt-YBjQUVIri8zfatFRViVlUBifTI2yfahN6urXBXKfmBBmnKXlkAOLYgs2PGv2QduK1H_sKBYX6ptpb5YQTYvCOcUA2hzTZ8IW45itQ_F04/s1600/Immagine.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="427" data-original-width="662" height="257" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlprGgHeJmw02qxf-Kggd40wOJ2DEMtKOrt-YBjQUVIri8zfatFRViVlUBifTI2yfahN6urXBXKfmBBmnKXlkAOLYgs2PGv2QduK1H_sKBYX6ptpb5YQTYvCOcUA2hzTZ8IW45itQ_F04/s400/Immagine.png" width="400" /></a></div>
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<div>
<div style="text-align: justify;">
Finally, I don't recommend the "average down" for the reasons above (apart from some exceptions, like change of trend or with other reversal signals). Instead, I highly recommend the respect of the risk management, of the SL&TP and in general of a suitable trading/investment plan.</div>
</div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-22391829550290840442018-05-05T20:05:00.000+02:002018-05-12T13:35:09.146+02:00Markowitz efficient frontier : backtesting. <div style="text-align: justify;">
The aim of the analysis is to build the efficient frontier that compares the average return (y) to the risk or standard deviation (x) of the top 100 Italian stocks (the market cap is the proxy of the size). Secondly, I will build one hundred portfolios (each portfolio is composed by one stock and each stock has the same weight, for simplicity), by decreasing order of best risk-reward ratio.</div>
<div style="text-align: justify;">
Thirdly, I will test the following assumption : the order of best risk-reward ratio should be the same also for the future performances (at least, substantially). </div>
<div style="text-align: justify;">
In this way, the third step will be the backtesting that will cover a medium/long time frame, for obvious reasons and it will be a continuous updating.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The time frame of the past returns is 5 years : it means sixty returns (monthly returns), from April 30, 2013 to April 30, 2018. The source of the data is the following (historical data) : <a href="https://www.investing.com/">Investing.com</a>. </div>
<div style="text-align: justify;">
The source of the stock screener is the following : <a href="https://www.investing.com/stock-screener/?sp=country::10|sector::a|industry::a|equityType::a|exchange::6%3Ceq_market_cap;1">Stock Screener - Investing.com</a>. </div>
<div style="text-align: justify;">
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<div style="text-align: justify;">
About the data, I converted the monthly returns into annual returns, for greater significance. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: center;">
Average Return (annual) = Average Return (monthly) * 12</div>
<div style="text-align: center;">
Standard Deviation (annual) = SQRT [(Standard Deviation (monthly) )^2*12]</div>
<div style="text-align: center;">
<br /></div>
<div style="text-align: justify;">
So, I adjusted the return for the risk (Standard Deviation), through the following formula : </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: center;">
Risk Adjusted Return = Average Return / Standard Deviation</div>
<div style="text-align: center;">
<br /></div>
<div style="text-align: justify;">
Finally, I ranked the stocks, according to the abovementioned ratio (best risk-reward ratio). </div>
<div style="text-align: justify;">
For simplicity, I built ten groups, always respecting the previous order. </div>
<div style="text-align: justify;">
According to the portofolio theory (please consult the links : <a href="https://www.investopedia.com/terms/e/efficientfrontier.asp">Markowitz efficient frontier</a> ; <a href="https://www.google.it/search?q=markowitz+efficient+frontier&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjf1Pvzg-_aAhUK7xQKHbgYCNgQ_AUICigB&biw=1366&bih=637">images</a>), the best stocks are those with the best ratio : they offers a greater return, given a risk rate or they offers a lower risk, given a return rate. Then, we have the following assumption : the expected returns and the expected risks are based on the past data. Of course, this is a limit and the aim of the analysis is also to implement a backtesting and to test the assumption. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The following chart shows the efficient frontier. </div>
<div style="text-align: justify;">
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<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsKnT22HYPIdFuybO0XPxCLAmAC0xWZw8dTYUOVe1JyolubEYYWkqbq_xQXaXTh3e_CRWKfU1BCiFTjwiubsrSMcUBpAoTYISe8_D5H2Az3MsuTJx2ZneTLXKXeUvRUQtteJqO1V2aBtw/s1600/efficient+frontier.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="875" data-original-width="1384" height="252" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsKnT22HYPIdFuybO0XPxCLAmAC0xWZw8dTYUOVe1JyolubEYYWkqbq_xQXaXTh3e_CRWKfU1BCiFTjwiubsrSMcUBpAoTYISe8_D5H2Az3MsuTJx2ZneTLXKXeUvRUQtteJqO1V2aBtw/s400/efficient+frontier.png" width="400" /></a></div>
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<div style="text-align: justify;">
The following tables show the ten groups, by decreasing order of best risk-reward ratio (--> ranking).<br />
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<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsFzT7jUt92gIIvl7AAPO3c94NqfgAAUssTRMG0fYZyAxdfoEGImLjrC4DFbBkaDmrG3oeoPvGqvjXn1JBOj1zDx1zup0jQk-iEug0216GkR2maxsLfwYx2IPUi761r2lASvGrlC6rBIg/s1600/group+v.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1084" data-original-width="846" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsFzT7jUt92gIIvl7AAPO3c94NqfgAAUssTRMG0fYZyAxdfoEGImLjrC4DFbBkaDmrG3oeoPvGqvjXn1JBOj1zDx1zup0jQk-iEug0216GkR2maxsLfwYx2IPUi761r2lASvGrlC6rBIg/s640/group+v.png" width="497" /></a></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoL3bWWwqemXrAkptPhCM6Clymae354paPlA4sUfAhDxoG94uLD0XLCtlszfc42VdtnC_atR7xZ_1lAnYWBj8KtBjtaB0Ews8OH4DfUzBQ-hz6UarIXuF7aPEhXe6kmclY3N3H_DIffRM/s1600/group+x.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1060" data-original-width="846" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoL3bWWwqemXrAkptPhCM6Clymae354paPlA4sUfAhDxoG94uLD0XLCtlszfc42VdtnC_atR7xZ_1lAnYWBj8KtBjtaB0Ews8OH4DfUzBQ-hz6UarIXuF7aPEhXe6kmclY3N3H_DIffRM/s640/group+x.png" width="508" /></a></div>
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In the future, I will test the assumption, as mentioned. The stocks with good past performance (with given risk) should outperform the others. </div>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-44244768268118120112018-04-29T14:38:00.002+02:002018-04-29T14:50:18.309+02:00The passive management. <div style="text-align: justify;">
The passive management is a style of investing associated with mutual and exchange-traded funds (ETF) where an investor aims to mirror a market index. </div>
<div style="text-align: justify;">
We can build the passive strategy through the following steps : </div>
<div style="text-align: justify;">
</div>
<ol>
<li>Choice of a panel of funds ;</li>
<li>Ranking of the funds ; </li>
<li>Choice of the funds in the panel with the best ranking.</li>
</ol>
<div>
The panel is chosen in accordance with particular requirements (filter by class, macrocategory, assets, country, risk, currencies and so on ; it depends on the investor's preferences : see the following link <a href="https://www.animasgr.it/EN/products/Prices-and-Performance/Pages/default.aspx#scheda=0">ANIMA sgr products</a>). </div>
<div>
<br /></div>
<div>
For example, the aim of the analysis is to rank the funds of the system "Anima Italia" ; the fund ISIN codes are respectively : IT0001040051, IT0005158784, IT0004896541. </div>
<div>
The asset allocation is composed by equities, largely ; the currency is EUR ; the equity country is Italy, substantially : for further information, please consult the portfolio breakdown and the <a href="https://www.animasgr.it/EN/Products/Scheda/Anima-Italia#cl=A&scheda=car">fund profile</a>. </div>
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<div style="text-align: justify;">
The site provides a rating and a benchmark for each fund ; however, we can build our benchmark and our rating. For the benchmark, we choose the FTSE-mib index because it can be a good comparative parameter, given the structure of the funds. For the ranking, we use the classic portfolio performance indicators. In this way, we import the NAVs on a excel sheet and then we calculate the daily returns. </div>
<div style="text-align: justify;">
The time frame is from February 22, 2016 to date. I converted the daily returns into annual returns, for greater significance. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgESlksspU-rWipsxuflzCPCsZsYtrTndh6HzBpIKf0YlRklJB9ch3cqPWaDdynyfWX0AQIE14CXqTU9J6mC9FoYJm2JE3gNI7t2fIu3RpEJfBIM4EdTVSl7OJXWqJ9h1_BomhcfplvSW8/s1600/ANIMA.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="570" data-original-width="1471" height="153" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgESlksspU-rWipsxuflzCPCsZsYtrTndh6HzBpIKf0YlRklJB9ch3cqPWaDdynyfWX0AQIE14CXqTU9J6mC9FoYJm2JE3gNI7t2fIu3RpEJfBIM4EdTVSl7OJXWqJ9h1_BomhcfplvSW8/s400/ANIMA.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Historical data (hidden cells for space requirements) : data source <a href="https://www.animasgr.it/EN/Products/Scheda/Anima-Italia#cl=A&scheda=quot">ANIMA sgr</a>.</td></tr>
</tbody></table>
<div style="text-align: justify;">
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<div style="text-align: justify;">
The same for the FTSE-mib index, aka benchmark. </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTTJvNxoNAiIVzLG3X-eTfOZSB6GhcSPbhDfedllRWWmS1xMtsXQ2bPylR7SRh7Gj96ozXCNsw4UNjJWhXn-XoXw71W2J-u1dNtq_L0cwiu0kg_nPcdCcqY93nSRmq9MBo15yqHQ2z0Mw/s1600/FTSE.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="553" data-original-width="233" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTTJvNxoNAiIVzLG3X-eTfOZSB6GhcSPbhDfedllRWWmS1xMtsXQ2bPylR7SRh7Gj96ozXCNsw4UNjJWhXn-XoXw71W2J-u1dNtq_L0cwiu0kg_nPcdCcqY93nSRmq9MBo15yqHQ2z0Mw/s320/FTSE.png" width="133" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Historical data : data source <a href="https://www.investing.com/">Investing.com</a>. </td></tr>
</tbody></table>
<div style="text-align: justify;">
<br />
In the following chart, we can see the performance of each fund compared to the benchmark performance. </div>
<div style="text-align: justify;">
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<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEish-QdgsA7F8MAiIopKh6cue7cC6aDhH5yIsZTEyB5U9fiu6gxXwc_F8DnscZmLSdMo-4Ri2i4HAo3yAynbbHTH1Z3pCd3R_oTqlGub7xSrbLaXrbS5JDFZa_6ZSKTynPR7RFdiGG6r_s/s1600/chart.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="487" data-original-width="1470" height="132" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEish-QdgsA7F8MAiIopKh6cue7cC6aDhH5yIsZTEyB5U9fiu6gxXwc_F8DnscZmLSdMo-4Ri2i4HAo3yAynbbHTH1Z3pCd3R_oTqlGub7xSrbLaXrbS5JDFZa_6ZSKTynPR7RFdiGG6r_s/s400/chart.png" width="400" /></a></div>
<div style="text-align: justify;">
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Now, we can calculate the performance indicators :<br />
<br />
<ul>
<li style="text-align: justify;">The <b><span style="color: red;"><u>Sharp's Measure</u></span></b> : the ratio uses standard deviation to measure a fund's risk-adjusted returns ; it quantifies a fund's return in excess of our proxy for a risk-free investment. It is equals to : </li>
</ul>
<div style="text-align: center;">
(R - Rf) / Std Dev</div>
<div style="text-align: center;">
R = average return of the fund ; Std Dev = standard deviation of the fund</div>
<div style="text-align: center;">
Rf = risk-free rate (I assume the average return of the BTP 10Y ITA)</div>
<div style="text-align: center;">
<br /></div>
<div style="text-align: justify;">
<ul>
<li>The <span style="color: red;"><b><u>Treynor's Measure</u></b></span> : the ratio is equal to the previous one ; however, the risk is adjusted for the beta. The index is equal to : </li>
</ul>
<div style="text-align: center;">
(R - Rf) / Beta</div>
<div style="text-align: center;">
Beta = beta of the fund<br />
<br />
<ul>
<li style="text-align: justify;">The <b><span style="color: red;"><u>Jensen's Alpha</u></span></b> : the index is a risk-adjusted measure that compares the average return of a fund to the estimated return of the Capital Asset Pricing Model (CAPM). The formula is equal to : </li>
</ul>
<div style="text-align: center;">
R - [Rf + Beta*(Rm - Rf)]</div>
<div style="text-align: center;">
Rm = average return of the benchmark (or market index)</div>
<div style="text-align: center;">
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<div style="text-align: center;">
<ul>
<li style="text-align: justify;">The <b><span style="color: red;"><u>M Squared Measure</u></span></b> : it is a risk-adjusted measure ; it explains the surplus return of the fund compared to the risk-free investment, considering that the variability of the fund is equal to the variability of the benchmark. The formula is :</li>
</ul>
<div style="text-align: center;">
(Sharp's Measure)*(Std Devm) + Rf</div>
<div style="text-align: center;">
Std Devm = standard deviation of the benchmark (or market index)</div>
<div style="text-align: center;">
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<div style="text-align: center;">
<ul>
<li style="text-align: justify;">The <b><span style="color: red;"><u>T Squared Measure</u></span></b> : the structure is the same compared to the previous one ; the difference is the risk, systematic risk or beta ; substantially, it calcualtes the surplus return compared to the risk-free rate, under the assumption that the systematic risk of the fund is equal to the systematic risk of the market. The formula is :</li>
</ul>
<div style="text-align: center;">
[(1 / Beta)*(R - Rf) - (Rm - Rf)]</div>
<div style="text-align: center;">
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<div style="text-align: center;">
<ul>
<li style="text-align: justify;">The <b><span style="color: red;"><u>Sortino Index</u></span></b> : rather than considering premiums regarding the risk-free asset, the index explains the surplus return with a minimum accettable return ; then, about the risk, it considers a minimum accettable risk, aka down side risk (the variability not appreciated by the investor ; we calculate a semi-standard deviation, only the negative deviations from the mean). The ratio is equal to : </li>
</ul>
<div style="text-align: center;">
(R - Minimum Return) / Down Side Risk</div>
<div style="text-align: center;">
For semplicity, we consider the minimum return equal to the risk-free return</div>
<div style="text-align: center;">
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<div style="text-align: justify;">
Finally, the higher the ratios, the better fund past performance (we must note that the future performance is not linked to the past performance ; however, it is a good beginning). </div>
<div style="text-align: justify;">
In this way, we can calculate the ratios and rank the three funds (see the following table). </div>
<div style="text-align: justify;">
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<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1D7h3WzJvRy7p_qzm08UFNbpRmJ4ep5tTCq9OCle1H3OP_Tq93EQber-trGmJ8MoMEuMci6l1bQa1rUYqwckc7DQqnhK4vQFcSLGd7lbHiKT5_cMpKOIUpx8MTzq-CfxrSc0dmPWnDhY/s1600/RANKING.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="188" data-original-width="1462" height="51" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1D7h3WzJvRy7p_qzm08UFNbpRmJ4ep5tTCq9OCle1H3OP_Tq93EQber-trGmJ8MoMEuMci6l1bQa1rUYqwckc7DQqnhK4vQFcSLGd7lbHiKT5_cMpKOIUpx8MTzq-CfxrSc0dmPWnDhY/s400/RANKING.png" width="400" /></a></div>
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<div style="text-align: justify;">
The ranking is :</div>
<div style="text-align: justify;">
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<div style="text-align: justify;">
1) Fund ISIN code IT0004896541 (the best) ;</div>
<div style="text-align: justify;">
2) Fund ISIN code IT0001040051 ;</div>
<div style="text-align: justify;">
3) Fund ISIN code IT0005158784 (the worst). </div>
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Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-47927745722075020652018-04-09T21:36:00.002+02:002018-04-10T06:56:02.350+02:00The "magnitude" of the liquidity. <div style="text-align: justify;">
In the building of a trading strategy, the liquidity is a crucial variable. </div>
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Secondly, the liquidity can be both a positive and a negative factor. </div>
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Of course, we have two market scenarios :</div>
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<ol>
<li style="text-align: justify;">An illiquid market ;</li>
<li style="text-align: justify;">A liquid market. </li>
</ol>
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In the first one, from the negative point of view, the price of a stock hardly represents the intrinsic value : in other words, the stock price will reflect poorly the underlying drivers of the fundamental analysis. The same is also for the technical analysis. The stock price doesn't correctly respond to the graphic signals. This bias can last for a long time and sometimes the gap cannot be solved. </div>
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In this way, the market context is artificial. </div>
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From the other point of view, we can use that fault to our advantage. That means that it needs to follow the next steps of the market maker. If on one hand, the market maker (aka MM) easily moves the price for lack of liquidity, on the other, we must not suffer this but we must make ourselves part of it. </div>
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In the second scenario, there is not the abovementioned bias because the market price responds quickly to the underlying factors (technical or fundamental). However, we cannot use to our advantage the previous fault. The market context is normal. </div>
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Finally, the first scenario is difficult to manage than the second one because the illiquid market is difficult to interpret. Neverherless, if we are be able to follow the MM's moves, this will lead to higher profits for the reason that the stock price is much more influential to price changes in the face of low traded volume, due to the market structure. </div>
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After this introduction, it is useful to indentify the two scenarios (1. and 2.) and above all the magnitude of the price influenceability. </div>
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The following methodology shows that. The steps are : </div>
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<ol>
<li style="text-align: justify;">Building the daily returns (%) for a time period (in general, one year is appropriate) ;</li>
<li style="text-align: justify;">Building the daily trading volumes ;</li>
<li style="text-align: justify;">Pondering the first one with the second one ; in other words, we consider the ratios (the daily returns are as absolute returns ; we are interested in the amplifying effect and we are not interested in the direction of the effect). The formula is :</li>
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[Absolute Price Change %] / [Trading Volume]</div>
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The Absolute Price Change % is equal to ABS(Price Change %)</div>
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Finally, we calculate an average value of the previous ratio (=AVERAGE<span style="text-align: center;">[Absolute Price Change %] / [Trading Volume]). Then, we multiply the average ratio for different and hypothetical volume levels. In this way, we can get an idea of the influence of volume on stock price (-> we get the hypotethical price changes % for given volumes). </span></div>
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<span style="text-align: center;"><br /></span></div>
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<span style="text-align: center;">Of course, this represents the market structure and it should not be considered as a correct value a priori. There are many variables that can change the survey data and the past trend is not like the future trend : the trading book and the market environment are some factors. </span></div>
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In the following chart, we have an example of illiquid market. The stock is COVER 50 S.p.A., a classic example of illiquid stock. The daily volumes are low and we can notice that it needs just a small volume to get a considerable price change (for a trading volume of 1K we have a price change % of 3.48%). </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEge1GZAHIOGMSDvXvEi1Q8vXE0CP0bsq_9tibglSJOfN2wRPhutRo7fM3bnvMaX6OL70d5SWyEqiZVdvHksV8AB-EtA4tXBmnrz_xKC6k379sqgQMcpMA2VpfrxXqa_047mKF7TXD0z7Ec/s1600/1.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="792" data-original-width="617" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEge1GZAHIOGMSDvXvEi1Q8vXE0CP0bsq_9tibglSJOfN2wRPhutRo7fM3bnvMaX6OL70d5SWyEqiZVdvHksV8AB-EtA4tXBmnrz_xKC6k379sqgQMcpMA2VpfrxXqa_047mKF7TXD0z7Ec/s400/1.png" width="311" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Daily Returns, from April 10, 2017 to April 6, 2018, hidden cells <br />
for space requirements, data source : <a href="https://finance.yahoo.com/quote/COV.MI/history?p=COV.MI">Yahoo Finance</a></td></tr>
</tbody></table>
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We can also analyse the abovementioned effect through a regression line.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5lvCGZD2rkZa4m75JRdjy9LiXvytaQ13bDxPTmf2CMIlrcrsK1XiwDC0iKRaLL9HifvKJBMDsvh6pU3UFh3OQlicRIRKRae47DTFcp5w3rpt36RxMCOonfHCSz4XHRXc4mW4hg7Iv5po/s1600/2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="454" data-original-width="418" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5lvCGZD2rkZa4m75JRdjy9LiXvytaQ13bDxPTmf2CMIlrcrsK1XiwDC0iKRaLL9HifvKJBMDsvh6pU3UFh3OQlicRIRKRae47DTFcp5w3rpt36RxMCOonfHCSz4XHRXc4mW4hg7Iv5po/s400/2.png" width="367" /></a></div>
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In the following charts we have an example of liquid market, the stock is UNICREDIT S.p.A. </div>
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The daily volumes are huge and in this way it needs a huge volume to get a substantial price change (indeed, for a trading volume of 1K we have a price change % of <span style="font-family: "arial" , sans-serif; font-size: 10pt;">7.85189E-07).</span> </div>
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For obvious reasons, the slope of the regression line is lower than the previous one. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCI3y9w0GaxdPEqaC7NT1CpQ3sJiZ9aXX0olbDGqJn8FCSMmMSfUVhEfnJQBNAa8GQ3skP-VQ2UmOfocIyec-kgZCwZ669sxNAwRXKF_i5xRaUwl6Jr12hGgKUsSSM0G660HH1hvNc6Qo/s1600/3.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="792" data-original-width="647" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCI3y9w0GaxdPEqaC7NT1CpQ3sJiZ9aXX0olbDGqJn8FCSMmMSfUVhEfnJQBNAa8GQ3skP-VQ2UmOfocIyec-kgZCwZ669sxNAwRXKF_i5xRaUwl6Jr12hGgKUsSSM0G660HH1hvNc6Qo/s400/3.png" width="326" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Daily Returns, from April 10, 2017 to April 6, 2018, hidden cells <br />
for space requirements, data source : <a href="https://finance.yahoo.com/quote/UCG.MI/history?p=UCG.MI">Yahoo Finance</a></td></tr>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoPQIMBHdJz9RkoCrqs9ecVQCwchGeu-PK98qFwwat4R1PhYGVsFXANqgp5YhXXNzQSwXx-P2s32rS8MgD9K6Pm6V_BxE-7qf3MUEJgXwKH99d6KUC-D4v2nRTRCAdM-m9L7AXM5AqZDw/s1600/4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="460" data-original-width="418" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoPQIMBHdJz9RkoCrqs9ecVQCwchGeu-PK98qFwwat4R1PhYGVsFXANqgp5YhXXNzQSwXx-P2s32rS8MgD9K6Pm6V_BxE-7qf3MUEJgXwKH99d6KUC-D4v2nRTRCAdM-m9L7AXM5AqZDw/s400/4.png" width="362" /></a></div>
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Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-41045048192812747852018-04-01T23:06:00.000+02:002018-04-09T20:51:29.817+02:00Estimate of the cost of debt.<div style="text-align: justify;">
The calculation of the firm's cost of debt is an important factor. Then, it has a direct application in various areas ; in particular, it is useful : </div>
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<ul>
<li style="text-align: justify;">to build a DCF model, in order to value a company (it is a variable to estimate the WACC) ;</li>
<li style="text-align: justify;">to adjust the market multiples (higher the cost of debt, lower the market multiple and viceversa) ;</li>
<li style="text-align: justify;">to understand the risk of a business and the debt sustenaibility (in other words, the cost of debt is the proxy of the financial structure) ; </li>
<li style="text-align: justify;">to value the risk of a stock, indirectly.</li>
</ul>
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And on that note, we can analyze the main calculation methods. </div>
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<b><span style="color: red;"><u>I. The cost of debt : the accounting method.</u></span></b></div>
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<b><span style="color: red;"><u><br /></u></span></b></div>
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The accounting method is based on balance sheet data. It is easy to estimate but it is also quite prone to errors. It means that if on one hand, the data are readly available, on the other the result is purely static because it doens't consider the perspective scenarios. Indeed, it is advisable to integrate the method with a perspective business plan, focused on the financial structure of the target firm. </div>
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According to this method, the cost of debt is equal to the financial expenses divided by the financial debt. There are two options : the first one considers the gross debt minus the cash and cash equivalents (it means that the debt can be paid by the cash ; this hypothesis is not always true) ; the second one considers the gross debt and the interest expenses (this hypothesis is more prudential). </div>
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Here we have an example ; the company is Amplifon S.p.A. We can notice the two options. The accounting data are the fiscal years 2017 and 2016. </div>
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For further info, please consult the following links : </div>
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<a href="http://corporate.amplifon.com/documents/20182/924189/10-annual-report-eng-2017.PDF/bd69823c-0a53-4e0e-b0f5-9d99d6ce87da">http://corporate.amplifon.com/documents/20182/924189/10-annual-report-eng-2017.PDF/bd69823c-0a53-4e0e-b0f5-9d99d6ce87da</a> ; <a href="http://corporate.amplifon.com/documents/20182/806218/press-release-fy2017.pdf/aa8c39df-721f-4535-a30d-2adafb1a1344">http://corporate.amplifon.com/documents/20182/806218/press-release-fy2017.pdf/aa8c39df-721f-4535-a30d-2adafb1a1344</a>. </div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVkmqnD_uPxfGg1GBMViVbeC0DCbsp7sBQyRpmHytQ9yzd0S7qJlnq3ZlDkbQyp1aJUfQ-7w4la0LDWJi0Ul54GPOYZtUTIzohDInn_RWs-LhJhY5iMw5Xs92wB69DaO0dfsU2-1U7aQc/s1600/table.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="363" data-original-width="525" height="276" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVkmqnD_uPxfGg1GBMViVbeC0DCbsp7sBQyRpmHytQ9yzd0S7qJlnq3ZlDkbQyp1aJUfQ-7w4la0LDWJi0Ul54GPOYZtUTIzohDInn_RWs-LhJhY5iMw5Xs92wB69DaO0dfsU2-1U7aQc/s400/table.png" width="400" /></a></div>
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<b><u><br /></u></b></div>
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As shown in the table, the cost of debt is equal to 7,41% if we consider the net debt and it is equal to 4,63% if we consider the gross debt. An important note : the interest expenses are divided by the average debt with the aim to make comparable the two quantities, the item of the income statement ("flow quantity") and the item of the balance sheet ("stock quantity"). </div>
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Another option of the accounting method is the following : we can also consider an average figure of the cost of debt on several years (3-5 years). In the same way, we can build a perspective table with the estimated financial debt and interest expenses (the next 3-5 years at the place of the past ones). </div>
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<span style="color: red;"><b><u>II. The cost of debt : the relation between the interest coverage ratio and ratings (the fundamental analysis drivers).</u></b></span></div>
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<span style="color: red;"><b><u><br /></u></b></span></div>
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We can link the interest coverage ratio (= EBIT/net financial expenses) to the ratings of a sample. </div>
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For example, the professor A. Damodaran (see the link,--> Ratings, Spreads and Interest Coverage Ratios, <a href="http://pages.stern.nyu.edu/~adamodar/">http://pages.stern.nyu.edu/~adamodar/</a>) has built a sample with the rated companies in United States. There are two tables : for large, for smaller and riskier companies (the proxy of the size is the market cap). With the current exchange rate and with the current m. cap, Amplifon belongs to the second group (<a href="https://www.investing.com/currencies/eur-usd">https://www.investing.com/currencies/eur-usd</a>). </div>
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<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6aaj7OUw1TU-1mmEh6xx_CB-figCazVxzU81qkz5p2i431oBQ-6mo7iYqjdDORjaxxfQXO40FghMtFGGnf_zgQfIv2ukrRIKGIePjz1NbAQxgGr1pO7C-wrnGj19szTtpQThGubbpR10/s1600/DS.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="371" data-original-width="415" height="357" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6aaj7OUw1TU-1mmEh6xx_CB-figCazVxzU81qkz5p2i431oBQ-6mo7iYqjdDORjaxxfQXO40FghMtFGGnf_zgQfIv2ukrRIKGIePjz1NbAQxgGr1pO7C-wrnGj19szTtpQThGubbpR10/s400/DS.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Data source : <a href="http://pages.stern.nyu.edu/~adamodar/">Damodaran Online</a></td></tr>
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The cost of debt is equal to :</div>
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Risk-free rate (Rf) + Default Spread (DS)</div>
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For Amplifon the DS is equal to 0.90% (the EBIT interest coverage ratio is 7.76 and the market cap is about $4 billion). For the Risk-free rate (Rf), we can use the annual return of the 10-year T-bond (see the link <a href="http://www.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xls">http://www.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xls</a> ; data source <a href="http://pages.stern.nyu.edu/~adamodar/">Damodaran Online</a>). For the year 2017, it is equal to 2.80%. In this way, the cost of debt for Amplifon is :</div>
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2.80% + 0.90% = 3.70%</div>
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As I said, the sample consists of US companies. For a more appropriate sample, of course, it is advisable to use European companies and rate of returns of government bonds, similarly. </div>
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Finally, we must remember that the spread that we add to a base rate can be determined by other fundamental ratios (the interest coverage ratio is just one of the drivers). In this way, the discussed methodology is a part of the framework based on the fundamental analysis. </div>
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<div style="text-align: justify;">
<span style="color: red;"><b><u>III. The cost of debt : the listed bonds.</u></b></span></div>
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The last method is among the most reliable and the easiest to apply methods. If we have a firm with listed bonds, the cost of debt is equal to the rate of return of the mentioned bonds (-->yield to maturity, YTM). Alternatively, we can take as a benchmark a panel of similar listed bonds.<br />
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For Amplifon, we can consider the bond listed on the Luxembourg Stock Exchange (LuxSE).<br />
See the following link : <a href="https://www.bourse.lu/security/XS0953207759/200201">https://www.bourse.lu/security/XS0953207759/200201</a>. </div>
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Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154tag:blogger.com,1999:blog-4446256175659614585.post-11106024133173751612018-02-04T11:06:00.000+01:002018-02-04T11:09:45.616+01:00Enel S.p.A. : chart update. <div style="text-align: justify;">
Here we have the chart update of Enel S.p.A. : the previous bullish trend has been confirmed ; indeed, the tops at 4.50 EUR and the top at 4.87 EUR are still valid (the same also for the dashed line, in the medium/long term) ; the pattern recognition (Dark Cloud Cover) has confirmed the change of the uptrend but strictly limited to the short-term. </div>
<div style="text-align: justify;">
In this way, the last view was spot-on (for further info, please see the link <a href="http://michelecarollo.blogspot.it/2017/09/enel-spa-chart-framework.html">http://michelecarollo.blogspot.it/2017/09/enel-spa-chart-framework.html</a>). In the following charts, I propose the updated analysis with the previous levels. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLBIkDP3hRkdETYMkjr0kGk1vBfY5hnPt5C8lJsnlZ83CQv6-JKhf_NDd97RM5MIS-LSMoiWyKc0SCi7iKO-Od1VX_1NckSinU3YcODceDyhbvv8eK-DA0M6-fb1vdGQJzqzRaqKa5Y90/s1600/Your+new+TVC.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="592" data-original-width="1299" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLBIkDP3hRkdETYMkjr0kGk1vBfY5hnPt5C8lJsnlZ83CQv6-JKhf_NDd97RM5MIS-LSMoiWyKc0SCi7iKO-Od1VX_1NckSinU3YcODceDyhbvv8eK-DA0M6-fb1vdGQJzqzRaqKa5Y90/s400/Your+new+TVC.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuSFFK3Hbwlz5lMFyWVPcNyd3FPxRnc-Zw23ZcHKV6eUCOioId-g6hl7InY1je-1w9Ozmr11CP6ovaU2Km8IpLl-hVcywpagMyZD-Bnpb-Lc7F907EBItJnQg4VrLmME3pxK84SB6TJ3Y/s1600/Your+new+TVC+%25281%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="592" data-original-width="1299" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuSFFK3Hbwlz5lMFyWVPcNyd3FPxRnc-Zw23ZcHKV6eUCOioId-g6hl7InY1je-1w9Ozmr11CP6ovaU2Km8IpLl-hVcywpagMyZD-Bnpb-Lc7F907EBItJnQg4VrLmME3pxK84SB6TJ3Y/s400/Your+new+TVC+%25281%2529.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
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Now, let's look at the chart framework of the current situation. We must pay attention to the levels identified by the yellow circles (see also the FIBO retracements) : from the top to the bottom, 5.60, 4.80, 4.50, 3.40, 2.00. This is an overview to set a bullish or a bearish trading strategy, of course. </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3GpDmfutDVPr9ixX2Wlr1tqd4r7_lpqiB6ZdfLKEp-R_gdtQTE9m40jhtWeD9KHpGD_LsYqIJcJjAyAvmVaZ7qksmzSoXPJyZyWlwbRjxVDxGHW_rEH62ef172fLKawIXR8itzCw3ifk/s1600/Your+new+TVC+%25283%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="592" data-original-width="1299" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3GpDmfutDVPr9ixX2Wlr1tqd4r7_lpqiB6ZdfLKEp-R_gdtQTE9m40jhtWeD9KHpGD_LsYqIJcJjAyAvmVaZ7qksmzSoXPJyZyWlwbRjxVDxGHW_rEH62ef172fLKawIXR8itzCw3ifk/s400/Your+new+TVC+%25283%2529.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
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<div style="text-align: justify;">
We can notice a break in the previous parallel channel. This means that it is a first alert : it represents a price correction in the uptrend (even more so with a break of the support at about 5.00 EUR and then with a break of the top/FIBO level at about 4.80 EUR). The chart shows a volatility excess with the BBs indicator : that can be a rebound of the stock (for example, see the first red circle) or a confirmation of the abovementioned correction. The crossing of the EMA 50 and EMA 100 fits in this view. Therefore, the next trading sessions will be crucial in order to understand the market direction. </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTcvyx9tZhuq32OjJhARhz9oTG5IwWtZRsKXQIo1Hban1Sa80upF2ioEpFZ-8d1b8CEn4oCGJ8c5bgdda2S9XO7thzgPPQWCMO7l4HZ2Dswb4lxaOdteB4CUEtvfSVtQdUN5OBC12qe88/s1600/Your+new+TVC+%25284%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="592" data-original-width="1299" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTcvyx9tZhuq32OjJhARhz9oTG5IwWtZRsKXQIo1Hban1Sa80upF2ioEpFZ-8d1b8CEn4oCGJ8c5bgdda2S9XO7thzgPPQWCMO7l4HZ2Dswb4lxaOdteB4CUEtvfSVtQdUN5OBC12qe88/s400/Your+new+TVC+%25284%2529.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
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<div style="text-align: justify;">
If we extend the timeframe, the chart framework is very clear. Here we have a monthly timeframe : the price levels are those already mentioned. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCLrvXSa_jT_iEaHjrLVFKGdWal3XYZeSFKymLj3OVQAOafo2WSBWLxg0QSBnc5RlZdBclTGnasp7lJjlBRoCnLXwxD_pZl5QUtGpT1Qq-unbnQ5E5vTea-2XLcs54nzASJ3Oz3mEMb1o/s1600/ENEL.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="592" data-original-width="1299" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCLrvXSa_jT_iEaHjrLVFKGdWal3XYZeSFKymLj3OVQAOafo2WSBWLxg0QSBnc5RlZdBclTGnasp7lJjlBRoCnLXwxD_pZl5QUtGpT1Qq-unbnQ5E5vTea-2XLcs54nzASJ3Oz3mEMb1o/s400/ENEL.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart from <a href="https://www.investing.com/">Investing.com</a></td></tr>
</tbody></table>
Michele Carollohttp://www.blogger.com/profile/01197098934388090649noreply@blogger.com023100 Sondrio SO, Italia46.1698583 9.878767400000015246.1258713 9.798086400000015 46.2138453 9.9594484000000154