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BREAKOUTS


AGII Poised For A Bull Run?

07/19/13 04:20:05 PM
by Chaitali Mohile

The long-term downtrend of AGII has reversed.

Security:   AGII
Position:   Buy

Agro Group Intl Holding (AGII) was at its all time high in 2005. But it went through a significant correction after that. You could have been alerted to this weakening if you had taken note of the negative divergence between price and the relative strength index (RSI)(14). In a very short time span, AGII crashed down to $29.71 and established support in this lower region. Thereafter, the stock moved horizontally in a trading range from 25 to 40. This lower consolidation phase continued for about six years.

While in this wide trading range, the average directional index (ADX)(14) (Figure 1) surged above 20 levels. The full stochastic oscillator (14,3,3) failed to sustain in the bullish region above 50 levels. It slipped twice from the overbought area. This shows that the stock was under strong bearish influence for the past six years.

FIGURE 1: AGII, MONTHLY.
Graphic provided by: StockCharts.com.
 
The longer the consolidation, the stronger the trend will be once price breaks out of the consolidation. Note the small white candles surging with the 50-day moving average (MA) support in Figure 1. The size of the candlesticks reflect the developing bullish confidence in the new rally. The bullish breakout gave birth to a fresh uptrend and also pulled the stochastic oscillator into an overbought zone. The RSI(14) is showing robust bullish strength. Currently, AGII has marked its 52-week high. Since the big picture in Figure 1 is healthily bullish the stock is likely to continue its journey above the 45 levels.

FIGURE 2: AGII, WEEKLY.
Graphic provided by: StockCharts.com.
 
The weekly chart in Figure 2 shows the exact breakout levels and the medium-term trading conditions of AGII. The stock breached the 50-day and the 200-day MA resistance in late 2012. The bullish moving average breakout induced strong bullish force in the rally. Both the moving averages followed the price rally, and eventually, underwent a bullish crossover on the price chart as seen in Figure 2. After the crossover, the buying pressure increased and developed an uptrend. An overbought stochastic oscillator and the RSI(14) are steadily moving in their respective bullish zone. Hence, there is no threat to the current bullish rally.

AGII can be considered by short-term and long-term traders and investors. Since the bullish breakout has occurred recently, the stock should travel with enormous bullish strength. Thus, traders can grab the opportunity to trade this stock.



Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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