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[Premium] Three Charts For The Week Ahead

October 11, 2020

We retired our "Five Bull Market Barometers" in mid-July to make room for a new weekly post that's focused on the three most important charts for the week ahead.

This is that post, so let's jump into this week's edition.

Last week we focused on long-term Treasury Bonds, Financials like Capri Global Capital and Indian Energy Exchange, and the Nifty Metal Index.

Let's move into this week's topics.

1. The first chart is of USD/INR, which looks like it's finally ready to accelerate to the downside. We've wanted to be short as long as prices are below their October 2018 highs near 74.50, and this consolidation is now resolving to the downside.

Besides being a trade idea in and of itself, this pair is important from an intermarket perspective given its negative correlation with Indian stocks. A weaker USD/INR will be a tailwind for stocks...and it appears its next stop is down near 70.50.

Click on chart to enlarge view.

2. The second chart we want to look at is the NZSX 50 Index, which broke out to new all-time highs last week on an absolute basis. This is a great example of leading markets/sectors/stocks continuing to lead. This is a great lesson we can apply to our own analysis, by focusing on the winners in India like Pharma, IT, etc.

3. The third chart we want to look at is Punjab National Bank. With the major Nifty indexes being up strongly over the last few weeks, we want to be paying attention to what the stocks who didn't participate in the rally are doing. Do they resolve to the downside now as the indexes consolidate? or do we see rotation into laggards that help drive the overall market higher?

That remains to be seen, but with a clearly-defined level of support and momentum diverging positively, the reward/risk appears to be in favor of the bulls here for a quick trade. If prices are above 27.50 on a closing basis, we can look for a move back put towards the top of the stock's range at 39.

In our view, these charts will help set the tone for this week and provide us information on how we should approach the market in the coming weeks.

Make sure to check out our other weekly post, "Trade Of The Week." And if you missed Friday's post on the Energy sector, check it out here.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

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