WSE indices technical overview - 9/28/2018.

Welcome to our periodic technical overview of the main Warsaw Stock Exchange indices.

WIG20

After breaking upwards out of the head and shoulders bottom pattern about a month ago, bulls unfortunately didn't ride the wave as we observed a decline to the level of the right shoulder of that pattern (about 2200 points).

In the previous technical overview I wrote:

If the index losses the 2200 points level, the optimistic scenario [following the H&S pattern upward breakout] would be denied. 

Luckily, the decline didn't intensify and the support at the level of 2200 points held out. We could expect this decline to occur - in the previous article, I mentioned the possibility of a throwback after the H&S upward breakout. I also showed the rising wedge pattern on the FW20 futures chart, which could result in a downward breakout - and it actually happened.

Because the optimistic scenario, according to what is written above, is still in the game in spite of all, I'm still expecting bulls to manage to push the index up in the near future. Still, they have to overcome the local top set up after breaking out of the H&S, located just below 2400 points. 

On the way up, we also have a potential resistance in the range of 2320 - 2340 points. This area was tested several times (in August and September, and earlier in April and May this year), and the breakout above that level looks like a one-shot for the time being. Sounds familiar? Yes, it means that a potential head and shoulders top pattern could emerge soon. Looks like a warning - we should also consider this possibility.

Finally, there is the uptrend line shown below that ATmatix detected in mid-September and it seems to be valid as for now. In my opinion, until this line holds out, we can still bet on the optimistic scenario regarding the blue-chips market. But if the H&S top pattern really emerged and was confirmed with a downward breakout, or the uptrend line was pierced, it would certainly be a serious bearish signal and we would expect the index to go back to the minimum established in June.

MWIG40

In our last technical overview I expressed my expectations for the mid-cap index to finally rebound and push through its resistance level. Unfortunately, I was wrong and the consolidation we've been observing from June to the end of August, turned out to be the prelude to a further discount. The support level resulting from the double bottom and the ascending broadening triangle pattern was pierced and the index  dynamically retracted almost 300 points lower. Fortunately, declines were stopped and we've been observing a solid rebound recently. As for now, it's only a pullback move towards the pierced level of 4200 points.

As you can see in the charts below, ATmatix calculated the downward breakout target relatively right thanks to its statistical model.

This level is not accidental for yet another reason - you could draw the support line, resulting from the minimum set by the index in November 2016, on a weekly chart. Also, it's not hard to notice the downtrend line still holds and perhaps we should expect some profit realizations soon.

SWIG80

Small caps also suffered a solid decline. Sadly, in this case there were no signs of rebound (yet).

In the weekly chart you can see that the index is close to its long-term level of potential support. It can be the reason for some relief - on the other hand though, there is still some space to the level of the valley established in year 2014.

WSE indices technical overview - 12/17/2017

Welcome to this year's last technical review of the main Warsaw Stock Exchange indices.

WIG20

In the previous month review (polish language only) I outlined a possible bearish scenario - however with some caveats. Firstly, I expected the energy sector to improve; secondly - the banking sector's perspectives were still positive; and last but not least we could count on the potential "Santa Claus rally" effect of December (it hasn't quite happened market-wide, albeit the small caps stock owners have some reasons to feel satisfied).

During the last month we could observe a rise (mainly because of the bank stocks), which eventually stopped a dozen or so above the level of 2500 points.
It seemed to be close to wipe out the negative signal of the Head and Shoulders pattern's downward breakout, but the index turned back yet again and now we're in the middle of defending the 2400 level - the index is bouncing up and down in a narrow horizontal consolidation region (HCR) - from 2370 to 2434 points.

The level of 2370 is not accidental here, as the index drop was stopped close to the 200-session SMA (Simple Moving Average) value. What is more, we could draw a trend line through the valleys in a way you can see in the chart.

Breaking down the HCR would be a clear invitation to continue the decline and to complete the bearish scenario mentioned in the previous blog post.
The opposite scenario is likely to be held back by the upper line of the hypothetical falling wedge pattern (see the chart above). To improve the technical situation again, the index should rise above the level of 2500 points, but it may not be so easy.

In theory, bears have more chances here. Why? Because some negative technical signals occurred for some of the main constituents of the index, having quite a large impact on its value (PKN Orlen, PZU). The banking and the energy sectors' situation is also important - we'll take a look at them later in this blog post.

MWIG40

The mid caps index is back again near the support of 4700 points. We can see that a descending triangle is emerging there - and our statistics for that pattern type favor the demand side of the market.

We could draw that triangle in several different ways, and depending on the method, the upward breakout has already happened and now we're observing a throwback - or it hasn't happened yet. This is a good example of our pattern detection alghoritm in action - ATmatix tries its best to check out the different variants of trend lines.

One way or another, there is a chance to reach 4900-points level again, although it means that the index may continue to stay in the horizontal consolidation region that already spans 9 months.

SWIG80

Small caps index has been the strongest link of the main WSE indices. Previously, we pointed out at the large ascending wedge on the monthly interval chart.

The blue trend line caused the index to bounce up, though we should remember that the last monthly candlestick is not yet complete.

Recently, the index has pierced the short-term downtrend line, which is a necessary - but not yet sufficient - condition to change the current trend in the short term. Still it's a long way to go to reach the another higher-order downtrend line.

We may expect a rise even up to 15000 points, although we should also expect a corrective decline back to (or even below) the level of 14300 points.

Sector indices

Our focus is still on two significant industries: banking and energy.

WIG-Energy has broken up, according to our expectations, out of the descending wedge pattern (you can also interpret this price scheme as a descending channel).

Unfortunately, the index has retracted shortly after the breakout, albeit we can still treat that move as a throwback to the upper trend line of the pattern - it happens quite often for this pattern type.

If the index drops below the November minimums (about 2900 points), it will deny the positive signal of the upward breakout mentioned above.

The banking stocks index, according to our expectations, has been doing quite well and has made the new high during the last month. The recent retractation and another attack at the maximums may cause some of the market participants to make another attempt to take profits, so in my opinion we should expect some pattern top to emerge. The alternative scenario of course is to make the new highs - which could also improve the technical situation of the WIG20 index.

WSE indices technical overview - 10/1/2017

Quite a lot happened since our last technical situation overview. Now it's time for an update.

WIG20

In the last post, we described the double top pattern and its invalidation with the upward breakout, which suggested a further increase, even to the level of 2600 points. This scenario has not worked out yet, but it doesn't mean we should reject it completely.

In the meantime, the index formed an another, slightly smaller version of a double top pattern, near the level of 2550. Last time we suggested that you should expect some resistance there:

(...) we are already close to some significant resistance level, which was repeatedly tested in years... 2013 to 2015, and all these attempts resulted in bearish reversals. We're talking about the 2560 - 2630 range. Thus, we're getting close to the important point for this index. In our opinion, we can expect profit realizations near these levels, as far as demand manages to lift the index there.

We can also treat the above price scheme as a head and shoulders, and both these patterns were detected by ATmatix. We signalled the downward breakout from the double top and the H&S top on September, 21. The price target was set to 2409 pts. However, we could also expect a reversal at the level of 2425, as the strong resistance was located there. It was pierced upwards in the end of August after a long horizontal consolidation. As a result, this resistance turned into a support level, so it has stopped the recent decline, as you can see in the charts.

The scenario, assuming the reach for the new highs is still valid then, since the last correction could be merely a throwback after the invalidation of the large double top pattern mentioned earlier.

This bullish scenario will fail if bears manage to pull the index below the level of 2400 points. However, the new ascending trendline awaits there and it may turn out to be yet another level of support.

MWIG40

Mid-cap stocks have performed much better and MWIG40 index has reached its new yearly highs recently. By adding the height of the horizontal consolidation region, inside which the index has bounced up and down since the beginning of the year, to the breakout level, we can set the theoretical target to about 5200 points.

An alternative option is to add the height of the lower channel, inside which the price has moved since June. Then we can expect MWIG40 to rise to the value of 5100 points. The round number of 5000 may also act as an overhead resistance here.

If the market chooses the opposite direction and retracts below 4800 points, it will be a clear alarm signal for bulls.

SWIG80

SWIG80 has been the weakest index of the main WSE indices for a long time. It continues its downward mid-term trend within the pattern that resembles a descending channel or a broadening descending wedge.

The horizontal consolidation region located at 15100 points, that could act as a support level, didn't stop the down slide, but there is a chance that the round level of 15000 will be able to do so.

However, only the down-sloping trend line break would be an initial signal for the trend change (the line is located at about 15300 points as of today).

Much depends on the situation of the remaining indices mentioned above. Their positive performance can be a signal for the other WSE indices to follow.

Sector (industry) indices

Regarding the sector indices, the chemical industry stocks have performed quite well. It is a consequence of the upward breakout from the descending wedge pattern that emerged in June. Recently, the index has reached its yearly maximum.

WIG-IT is on the other side of the coin. Stocks belonging to this sector have experienced a significant correction during the last few months. The recent index consolidation may suggest an attempt to rebound or it may be just another stop before a further decline. The level of about 2070 points is critical here.

WSE indices technical situation overview - 9/1/2017

It's been quite a long time since our last technical situation overview (polish language version only). Meanwhile, WIG20 index has reached the level previously set by ATmatix, and made it even higher. On the other hand, small caps turned out to be the weakest link of the Warsaw Stock Exchange.

WIG20 - new highs

Recently, we've been expecting the rise to the level of 2468 points on this index, due to the upward breakout from the flat base pattern that emerged in july.
As you can see in the chart, this scenario has been already accomplished.

However, the first approach near the 2420 level failed and the index rebounced down slightly with the throwback below the breakout level of 2363 points. But bulls regained control once more and the index jumped above 2500, making its new yearly highs. Should we have expected that?

Let's take a look at another pattern - the ascending channel. ATmatix detected this setup on august, 14. The first downward breakout could be misleading, as the downward movement suddendly reversed and the index run up vertically with an impressive momentum, piercing the top of this pattern with a considerable turnover volume. Target price, predicted by ATmatix, was reached on august 28th, almost in point.

What to expect next? Looking at the double top pattern, which was invalidated with the upward breakout, we can expect another rise, even above the 2600 level. This target was measured using our statistics that allow us to predict the post-breakout upward movement even in case of pattern tops.

We had a similar situation already this year - forming the top pattern on WIG20, then invalidating it with a rise to the new highs - see the example pattern.

Of course this is not 100% sure, as we are already close to some significant resistance level, which was repeatedly tested in years... 2013 to 2015, and all these attempts resulted in bearish reversals. We're talking about the 2560 - 2630 range. Thus, we're getting close to the important point for this index. In our opinion, we can expect profit realizations near these levels, as far as demand manages to lift the index there.

MWIG40

When we looked at the technical situation for mid-cap stocks index in July, it was in the middle of testing its important resistance level. A number of chart patterns emerged there, for which the downward breakouts that occured could lead to a further decline - such as the rising wedge pattern below:

Nonetheless, the 4660 target has not been reached yet, as the drop was stopped near the 4800 horizontal support level.

So we're in a sort of ambiguous situation here - we should be aware of both bullish or bearish scenario. We can expect a breakdown of the 4800 level mentioned above and seeking the underlying support near the 4660 area, or we can also expect the another attempt to break up the resistance located at 4960 points and reach for a new highs.

SWIG80

Previously, we pointed out at the triangle pattern and its downward breakout, for which the target of 15000 points on the small-caps index was set. This target hasn't been achieved yet and there is a chance that it won't be reached at all. Looking at the chart with a broader scope, we can notice the area near 15100 points and consider it as the potential support. It comes from the horizontal consolidation region that occured in February this year and the index value has already come close to this level during the last few weeks.

We can interpret the price scheme that emerged recently, in several different ways - for example we can consider it as a broadening falling wedge, and so it slightly changes the market perspective, as our statistics indicate the greater possibility for an upward breakout, rather than in the opposite direction.

Another version of that data pattern was automatically recognized by ATmatix in this way:

... and yet another in the following way:

All these pattern types with upward breakouts are a positive signal quite often, so we can assume the index is likely to go back up near the value of 16000 points.

The situation is not so clear here as well, but still the attempt to rebound may turn out to be successful - in our opinion, the anticipated rise above the 15600 level, along with a strong turnover volume, should increase the chances to defend the recent minimum. If the market chooses the opposite direction, the level of about 15100 points is expected to form the another layer of support.