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Sunday, April 12, 2009

Taiwan (TSEC) Chart Pattern - Apr 10, 2009

When I  discussed about the Taiwan (TSEC) chart pattern on Friday, Apr 3, '09 I had made the following observation:-

In the Mar '09 rally - in tandem with global markets - it has not only pulled out of the consolidation phase, but has made a clear 'rounding bottom' chart pattern on significantly higher volumes.

The TSEC has moved above the 20 day EMA and the 50 day EMA - both of which are moving up. This is a clear bullish sign. It is tantalisingly poised below the trend deciding 200 day EMA. My guess is that the 200 day EMA won't be able to stop the up move.

Let us take a look at the 6 months closing chart pattern of the TSEC to see what happened last week:-

Taiwan_Apr 1009

(Please right-click on the image above and open it in a new tab or window for a better view.)

Guess what? After getting resisted initially, the index pierced through the 200 day EMA - just as I had expected. What was my expectation based on? Firstly, the higher volumes. More importantly, the 'rounding bottom' pattern of the TSEC - which may not be discernible to the untrained eye, but is clear as daylight when you look at both the 20 day EMA and 50 day EMAs.

See how the shorter and mid-term EMAs have made saucer-like patterns on their climb upwards, along with the index on higher volumes? Classic technical stuff!

What next? Is a new bull market confirmed? Almost, but not quite yet.  The 200 day EMA is beginning to flatten out but the 20 day and 50 day EMAs are still below it. That may change soon.

There are a few other hurdles visible as well. Both the ROC and RSI have made lower tops while the index is making higher ones. This is a 'divergence'. The MACD is above its signal line and both are in the positive zone, but have stopped rising. The slow stochastics has been in the overbought zone for a month now, and may be due for a correction. Finally, the TSEC is only 200 points below the 6000 level where it is likely to face resistance.

Bottomline? The Taiwan (TSEC) chart pattern is looking the most promising among all the indices discussed so far and may well be signalling a new bull market. But there could be a correction to the up move in the near term.

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