An upside-down perspective

by Cam Hui

Posted: 05 Dec 2011 12:27 AM PST

For a different perspective, it’s always useful to look at a stock chart differently. Consider the following chart whose identifying labels have been removed, would you buy this stock?


The pattern certainly looks constructive. The “stock” has certainly been forming a wide saucer base and undergoing an uptrend. Would you buy it?
What about this next one?

This chart of this second “stock” is similar to the first one, except that the pattern is a little better developed inasmuch as it has broken out of resistance and undergoing a classic bullish cup and handle formation.

I don’t want to keep everyone in suspense. The first chart is the Euro STOXX 50 viewed upside-down, which is the market’s signal of the ongoing problems in the eurozone, and the second is the upside-down chart of the yield on 10-year Treasury Note (TNX), an indicator of the risk-off safety trade. Here I present the original charts, without further comments or annotations.


These charts have mixed messages as to the timing of a break. The inverted chart of TNX suggests that the time to tactically get defensive is now, while the chart of the Euro STOXX 50 indicates a breakdown is more likely in 1Q. Much could happen next week as we approach the Marseilles summit, but many obstacles remain.

My inner investor tells me to be afraid, very afraid. My inner trader tells me to be prepared for volatility in the next two weeks, which will see an ECB meeting, an EU summit and an FOMC meeting. Anything can happen in the short-term.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. (“Qwest”). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.


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