Top 3 Greek Stocks Hedge Funds Should Include - A Technical Perspective
Investing in the Greek stock market is an example of how balance the risk:reward ratio should be. The political instability as well as the extensive recession makes (ASE: INDEX) to be highly volatile and to have intensive price fluctuations.
Hedge Funds which are highly speculative do find opportunities in such market. In other words, the Greek stock market can satisfy the needs of such funds. In this article a thorough technical analysis will be conducted in three “blue chips” from the FTSE/Athex large cap.
Stay long for the medium-to-long term:
- RSI and R% generate a strong buy signal
- STOCHASTIC indicators reach the oversold levels
- SMAs show signs of improvement
Apprehend the risk:
- Political instability if early elections took place. Such a scenario would be catastrophic for the growth and the recovery of the economy.
- Inability of the European members to find solution regarding a potential third bailout package.
As far as the simple moving averages are concerned, there is a weak buy signal. The buy signal is generated owing to the fact that the smallest are moving over the biggest moving averages. For instance, the 50D SMA is moving over the 100D and 200D SMA (200D<100D<50D = buy).
However, what makes the buy signal to be weak and mediocre is the fact that the price company is moving below the 50 and 100D SMA as well as tends to intersect with the 200D. Moreover, the fact that the 100D SMA has an aggressive upward momentum and the fact that the 50D follows a plateau phase, it underlines that the 100D will overpass the 50D SMA.
As a result, the SMAs highlight that a potential price correction in the short term might be obvious. Yet, the other indicators that are used reveal that the price has many chances to increase.
RSI - R% - ROC
The relative strength index and the Williams %R reveals that the asset as well as the momentum of the asset lie within the oversold levels. More specifically, the RSI is equals to 34.34, 4.34 points above the oversold level of 30. As long as, the rsi is below 50 and close to 30 then the asset is considered oversold.
Moreover, as the momentum is concerned, Williams %R highlights that the negative momentum is due to change to a more upward one. %R is -93.24, breaking the oversold level of -80 by 13.24 points. This means that the momentum is on the verge of moving upside. In the meanwhile the rate of change shows that the velocity is starting to recover.
Recovery and improvement of roc are the two key aspects. The rate is equals to -9.89, a negative number that justifies the current downward momentum and oversold asset. However, the negative rate highlights that the momentum is due to change because has reached one of the lowest velocity levels of the two years. With this in mind and the fact that roc has been improved by the last two months by an average of 4.64 points show that a price increase is very possible to come.
%D and %K are 18.72 and 16.78 respectively. Both Stochastic oscillators signify the tendency to move closer to the oversold levels. This means that a potential price increase is very likely to happen. Moreover, the fact that both %K and %D are in a plateau phase means that the oscillator has reached a bottom line and thus a recovery will take place. The downward of the oscillators has stopped very close to the oversold levels and thus a change to the momentum is due to happen. The next phase is the increase of %K over the %D.
ADX - DMI
-DI and +DI are 28.78 and 9.45 respectively, whereas the ADX is equals to 27.97. It is highlighted that the trend of the price is downward because -DI and ADX is bigger than 25. It is the strong ADX value that indicate that the downward momentum is viable.
On the other hand, even if the indicators illustrate a negative momentum, it is the high value of -DI that signifies a potential correction. As it is depicted by the graph, -DI has reached in such a high level that the first decline of the trend is on the epicenter. Moreover, it is assumed that -DI has reached one of the highest levels. The graph has climbed to the high levels of 4/13, 4/12-7/12 and 10/11. By looking in the past, we see that after a big increase, there is a significant correction.
As a result the fact that the strong -DI shows the first signs of weakness and the fact that it has reached one of the highest levels, indicate that a potential intersection with +DI is very possible. Therefore, the intersection will induce the change of the momentum and the creation of an upward trend.
Consider opening a long position:
- At prices €5.60 - €5.80.
- Support and resistance levels €5.03 and €6.97 respectively.
- If price goes below €5.03 and fluctuates among the €50.0 - 38.2% (€4.43 - €5.03) of retracement, then enter a new position without closing the previous one.
- Immediate target the 50D SMA at €5.98 and medium term target at €6.50 (the green resistance level, which is considered as the peak of the current “head and shoulder”).
- If the green level breaks then, the doors open to the highest highest resistance of May 21, 2013 at €6.97.
The moving averages indicate an opportunity to buy. The 50D average is moving over the 100D and the 200D. The fact that the smallest averages are moving over the biggest averages means that there is a significant buy signal.
On the other hand, even if there is a significant buy signal, there are some signs of weakness. First, the price has started moving below the 50D and is on the verge of intersecting with the 100D. Moreover, it is appeared that the gap between the averages has become smaller. It seems that that the 50D, 100D and 200D to move very close together.
As a result, SMAs highlight that there is a buy signal which appears some signs of weakness. This means that a potential price correction in the near term might take place, yet in the medium term there might be a continuation of the price increase.
RSI - R% - ROC
The rsi is equals to 40.43, indicating that the asset price is moving near the oversold levels. The level of 30 is the oversold area where the asset is considered to have a considerable number of sellers. From this point, it is obvious that the first buyers might appear. The low rsi highlights that the price of the asset is undervalued. As it appears also in the graph, the trend seems to have limited its ferocious decline, a some kind of stable decline shows that recovery will take place or otherwise that the number of buyers have increased.
Furthermore, a more significant undervaluation appears with the William %R. The r% is equals to -88.61 breaking the oversold level of 80.0 by 8.61 points. This is another indication, that the price is oversold in the medium to long term. The fact that both indicators show that the assets is undervalued, it is an opportunity to go long.
The rate of change is equals to -10.56. As it appears in the graph the lowest roc is equals to -21. However, the value of -10.56 is one of the lowest prices since June 5, 2013. It is obvious that the decreasing roc (negative value) is a result that is explained from the rsi and the r% indicators. The undervaluation of the price assets through the months make the velocity to be negative or to create a downward trend.
On the other hand, the fact that the negative low velocity is one of the lowest since June and the fact also that is one of the lowest values in general indicate that the rate will change. In other words, as it was explained by the rsi and the r% indicators that the oversold level is the time where most of the buys will appear, in the current situation the negative growth will recover because the price will increase. Buyers will outweigh the sellers.
%D and %K are 26.99 and 21.96 respectively. The momentum appears to be heading downward, but the oscillators are moving closer to the oversold levels. Both %K and %D are at the 6.99 and 1.96 point respectively, above the oversold level. Moreover, the bottom that is created is one of the lowest through the periods.
The fact that %K stabilized its decline and entered into a flat zone signifies that the recovery and an upward momentum will take place. This also means that that the price will increase too. Since, the %K entered into a flat zone, then it will start moving over and above %D.
ADX - DMI
-DI is equal to 21.73 and ADX is 19.22. Both numbers reveal that the downward trend is too weak. Although, the graph shows that -DI is moving above +DI and thus there is a significant decrease, the main point is to perceive the effectiveness of the trend.
Owing to the fact that both ADX and -DI are lower than 25, it means that the downward trend is on the verge of breaking even more. Furthermore, the declining ADX through the periods underline that the strength of the trend will weaken even more.
As a result, this means that a potential intersection amongst +DI and -DI will take place. Alternatively, the momentum will change and the +DI will overpass the -DI since the number of buyers will increase, making the price skyrocket.
Long position considerations:
- €7.78 - €8.00 range
- Support level at €6.45 and resistance level at €9.07
- If the price goes under €6.45 (38.2% of Fibonacci retracement), consider entering a new long position without closing the previous one.
- The price of €8.10 is the near term target (50D SMA), whereas the medium term target is the price at €8.50 (the green resistance level, which is considered as the peak of the current “head and shoulder”).
Metka has a different technical approach than Jumbo and Hellenic Exchanges. While in the other two companies traders want to take advantage of the undervaluation of its asset price, in Metka the exploitation of its rising tendency is a major opportunity. Look below to see the technical indicators signify that the company has already started to skyrocket. Therefore, we want to exploit this growth.
The upward momentum is depicted by the rsi and the Williams %R. Both the rsi and the %r value are near 50. RSI is equals to 48.80 whereas %r - 59.49. As depicted from the graph, the trends follow an exponential growth pattern, as both the indicator left behind the oversold levels and the tendency to reach the neutral level of 50. When they reach this level it is obvious that the momentum will change and the share price will increase.
- The stochastic oscillators, both %K and %D which are equal to 69.57 and 40.64 respectively, overpass the oversold value of 20. The upward strong momentum is depicted by the the fact that %K is moving aggressively above the %D. This strong upward tendency is a result of the price increase.
Signs of Improvements
There are some interesting sign of further improvement:
- The SMAs have created a golden cross that will most likely benefit the 50D average. Through a three month period, the 100D was moving over the 50D and the 200D. Meanwhile, the 200D average was moving upward, tending to overpass even 50D. However, the current golden cross shows that the 200D is under a plateau phase and the 100D entered in a flat zone. As a result, the 50D shows some kind of recovery.
- The rate of growth shows some great improvements. Since last month, the roc managed to decrease from the high - 16.45 - to the current levels of -3.31. This increase and improvement highlight that the velocity of the ex-downward momentum is transforming upward.
- Although -DI, which is 26.48 is moving over +DI, which is equal to 16.44, the first sign of weakness of the trend is on the epicenter. The gap between -DI and +DI indicate that the number of sellers are bigger than the number of buyers. Moreover, the fact that ADX is 29.52, bigger than 25, underline that the downward trend will continue. On the other hand, in the graph is depicted that the decline of the -DI and the increase of +DI has started. What is obvious is that it will create an intersection that will induce the rising of the share price. Buyers seem to be waking up!
Considering a long position?
- Keep an eye at €10.40 - €10.60
- Support level is at €9.37 (red line) and resistance level at €12.78
- If the price goes under €9.83 (movement between €9.37 - 38.2% of Fib. retracement) traders might want to enter a new long position, without closing the previous one.
- Near term target at €10.95 (50D SMA), whereas medium term target at €11.93 (the green resistance level, which is considered as the peak of the current “head and shoulder”).
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