RRG Analyze the indices and stocks that are making moves this week

The weekly Relative Rotation Graph (RRG) below provides an interesting picture of the world’s leading stock markets. All but two of the indices we monitor are in the leading quadrant, indicating that most markets are outperforming our benchmark, the MSCI World Index (MXWO).

Entering the leading quadrant this week are the FTSE 100 (UKX), S&P 500 (SPX), France’s CAC, Germany’s DAX and pan-European STOXX. Their move into the northeast sector of the chart means they are rising on both axes and are in a relative uptrend against the MSCI, pushed higher by strong momentum.

The length of the arrow corresponds to the strength of the pull, so long arrows represent a more powerful pull than short arrows. The standout performers are therefore Australia’s ASX (AS51), while Japan’s Nikkei (NKY) also remains strong. In contrast, the Nasdaq 100 (NDX) is in a decline, heading towards lagging Hong Kong’s Hang Seng Index (HSI).

The Australian market is enjoying a rally

After falling to 6,400, Australia’s ASX 200 rallied sharply from that support level and appears to be climbing towards the resistance level of around 7,100 set in July. A break above the two short-term tops at 6,800 would underline the index’s strength, which could trigger a rally towards the 7,100 area.

The lower part of the chart above shows the moving average convergence/divergence (MACD) line moving sharply upwards, followed by its signal line. The gap is widening, indicating strong positive momentum for the ASX 200.

Stock to watch this week: WiseTech Global

The third placed company in our ranking of leading stocks to watch last week – logistics software company WiseTech Global [WTC] – has hit the ground running, based on our analysis of the Australian market. In addition, the stock appears to have further upside potential.

WiseTech’s price chart above shows that the uptrend from the July low – which culminated in the stock topping $60 – has been broken. The recent high of $58 was the first lower high after that break. The rally to the lower high came from a test of support just above $52. The top was completed with an “island reversal” – a cluster of one or more candles with a gap going in and a gap coming out, setting the candles apart, without overlap, from the rest of the chart. This pattern is usually a weak formation that points to lower prices. The reversal seems to have wreaked havoc on it, with the fall that followed taking the stock down to $50.50.

But WTC has since rallied again and climbed back to $58.40. Since falling to a low of $50.50 at the beginning of the month, the stock has shown an up-low pattern. The price action now looks like an “ascending triangle” – usually a bullish formation. A break above the two highs at $58.50 would confirm that. The ascension of the MACD line, which has broken up through its signal line, provides a further indication of positive momentum.

Pricing is indicative. Past performance is not a reliable indicator of future performance. RRG’s opinions and observations are their own and should not be relied upon as the basis for a trading or investment decision.

Background image

How to trade in the financial markets

A guide to spread betting and trading CFDs, with examples of different trading strategies and an introduction to the three pillars of trading.

get this free report

Mobile trading app

Disclaimer: CMC Markets is a run-only service provider. The material (whether or not it expresses any opinion) is for general information purposes only and does not take into account your personal circumstances or goals. Nothing in this material is (or should be deemed to be) financial, investment or other advice that should be relied upon. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any particular person. The material has not been prepared in accordance with legal requirements aimed at promoting the independence of investment analysis. Although we are not specifically prohibited from trading before providing this material, we do not seek to profit from the material before it is disseminated.

Leave a Comment