What often gets lost in the shuffle between whether or not to buy emerging market stocks is the fact that there are several important components within the group. Emerging markets aren’t just one thing. They are a collection of major markets around the world that are not yet fully developed.
Today we’re talking about the structural breakout we’re seeing in shares of the India Exchange Traded Fund $INDY. Look at the former highs in 2011 that were tested again in early 2015. This year prices were finally able to break out above that key resistance to begin a new leg higher. These are characteristics of uptrends, not downtrends. The weekly bar chart tells the story well:
Looking a little closer, here is a daily line chart of $INDY which only takes into account the daily closing prices over the last few years. If you turn your attention to those early 2015 highs just above 33, it is very clear that the former resistance turned into support multiple times this year. This Principle of Polarity is one of the most important concepts in Technical Analysis. What it suggests is that there was enough demand to absorb all of the overhead supply that had been in place for years. This does not happen overnight. It takes time:
We want to be buyers of any weakness in India and be long $INDY if we’re above the 2017 lows, which were the former highs in 2011 and early 2015. Our projections give us a target near $40 in the short-term, but based on the size of this massive consolidation, there is certainly much more upside potential than that. From a risk management standpoint, the line in the sand is very clear. If we are wrong, we will know soon and the risk is very well-defined. When our upside objectives are exponentially greater than the risk, these are opportunities where we want to get involved.
If you’re interested in learning more about Allstarcharts India, make sure you sign up here to receive the details of our upcoming launch. I will be visiting Delhi and Mumbai the week of January 7th-13th. Feel free to contact me if you are in the area and I will send you the invitation to the live presentations I will be giving while I am in each city.