On
August 1, 2012, I wrote an article about Royal Bank of Scotland Group (LSE:RBS).
Here is the link to that article: http://www.advfn.com/newspaper/azeez-mustapha/7605/royal-bank-of-scotland-group-buyers-gain-upper-hands.
In it I said that buyers would gain upper hands, especially following a long
period of bearish run. The technical analysis used showed that the stock was
supposed to rally after an extended downward movement. The technical reason
behind this was also given. The forecast has proven to be correct as the stock
perked up - not for a somber future - but a brighter one.
Some
readers and speculators ask, WHAT NEXT? As the recent chart on RBS shows, institutions
are now holding long orders as some misinformed private traders still remain
short. This signifies a nice chance to maintain bullish orders on the
market.
Technical Forecast
As
far as this market is concerned, the price has turned bullish. This has been
imputed to bullish pressures, as the price now possesses the temerity to
subjugate bears conspicuously. Since late July, the price has been trying to go
northward despite some pullbacks in the price. For this analysis, Parallel
Trendlines and Relative Strength Index (RSI) period 14 are used. The Trendlines
show that there has been a sharp rise in the price for several days, especially
since the beginning of September 2012. The bullish pressure would be valid as
long as the price stays above the lower Trendline (price is expected to break
out of the upper Trendline as the northward rally continues). Even if the price
breaks the lower Trendline to the downside, the bullish bias would still remain
intact; as long as the RSI 14 stays above the level 50. Even this forecasted
downward correction would only enable new buyers to enter at a lower price in
the context of an uptrend.
Right
now, there has been some insignificant bearish pulls. This is normal and
expected, given the fact that the RSI 14 has gone into the overbought region (a
correction was bound to happen here). Once again, as long as the RSI 14 remains
above the level 50, the current bullish run is valid. When this article was
being prepared, the price was closed at 274.4. As the market opens, immediate
support levels would be around 274.00 and 265.50; immediate resistance zones
that the price would need to break before going further up would be 275.00 and
275.50. I would recommend only long positions at this stage. Going short could
be catastrophic. Irrational behavior may preclude traders from making wise
decisions.
Conclusion: Though trading the RBS
shares can be an emotional issue, careful and honest analysis of what the
market is doing will help us realize the fact.
Probably one of the best things speculators can do continually to their
advantage is to buy pullbacks in an uptrend (or sell rallies in a
downtrend).
This
article is ended with the quote below:
“I
believe the market speaks in terms of price.” – Ken Long
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Azeez Mustapha
Market Analyst, Trading Signals Provider and Coach
Copyright (C) ADVFN PLC
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