alpha global - the role reversal

7/31/2019 Alpha Global - The Role Reversal

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30 APR 2012

ALPHA

The Role ReversalOnce you understand the concept of a trend, the next major concept is that of support and resistance. You'll often hear analysts talk aboutthe ongoing battle between the bulls and the bears, or the struggle between buyers (demand) and sellers (supply). This is revealed by theinability of prices to move above a (resistance) or below a (support). Resistance, is the price level that a stock or market finds it hard tosurpass. These levels are seen as important in terms of market psychology and supply and demand. Resistance levels are the levels atwhich a lot of traders are willing to sell the respective asset. When these levels are broken new levels of support and resistance areestablished.

Its also called as role reversal. Once a resistance or support level is broken, its role is reversed. If the price rises above a resistance level, will often become support. As the price moves past a level of support or resistance, it is thought that supply and demand has shifted,causing the breached level to reverse its role. For a true reversal to occur, however, it is important that the price make a strong movethrough either the support or resistance. Now just like everything the significance of a role reversal is determined by the temporal characterof the levels. W hether the resistance level is for a month, for a year or for more.

Below is the classic example of a role reversal. S&P500 previous at 1,360 resistance levels was broken and now the 12 month resistancehas become the support. For DOW, the role reversal is from 2008 and near 13,000 levels. A break at 13,200 previous high will confirm that

the new up leg on DOW has started with price targets point up till 13,500 and higher. These role reversals worked for S&P 500 even in2011 lows at 1,163 levels. How the global equities are managing this role reversal also suggests their respective level of strength andweakness. In case for India, the multi month role reversal level lie at 17,600. A break here would confirm a break of previous resistance andpotential role reversal. W hile on the multi week degree, if prices stay above 17,000 levels, the role reversal can be considered complete anprices can be considered already in a positive mode. A similar reversal level stands at 110 levels for MSCI Asia ex Japan, 1700 for MSCIEastern Europe. For China the resistance levels lie at 2,500. In case of commodities, prices have no role reversal yet as both Brent andGold are still below respective resistances at 130 and 1,800 levels. A top commodity market Brazil is also testing key role reversal levels at60,000. A break at respective levels will confirm that the commodity case remains stagnating and negative.

S&P500. ROLE REVERSAL POSITIVE FROM 1,360 LEVELS


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DOW 30. POSITIVE ROLE REVERSAL LEVEL LIES AT 13,000

DOW 30. ABOVE 13,200 GET READY FOR MORE UPSIDE.


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S&P500. A PREVIOUS POSITIVE ROLE REVERSAL HAPPENED @ 1,160 LEVELS

S&P 500. POSITIVE ROLE REVERSAL LEVEL AT 1,362 LEVELS


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SENSEX. WE NEED A CLEAR BREAK ABOVE 17,600 LEVELS FOR ROLE REVERSAL

SENSEX. MULTI WEEK POSITIVE ROLE REVERSAL LEVEL LIES AT 17,000

a/i

b/ii

W

X

Sub 17,400 prices can push

lower till 16,400 beforecompleting the ongoing

correction.

Y


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MSCI WISE Asia ex-Japan Top Total Return Index

EM EAST EU ex RU PRICE EUR IDX. Counter trend

ROLE REVERSAL COMPLETE AT 1700LEVELS, AS MACD MOMENTUMCROSSOVER TURNS POSITIVE

ABOVE 110 THEPOSITIVE ROLEREVERSAL ISCONSIDEREDCOMPLETE


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BRENT. STILL BELOW KEY RESISTANCE @ 127

GOLD. STILL BELOW KEY RESISTANCE @ 1800 LEVELS

0.382 FIBONACCI SUPPORTS


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BVSP. HEADING TO PREVIOUS KEY RESISTANCE NOW SUPPORT @ 60,000

SSEC. CHINA. KEY RESISTANCE LIES @ 2,500


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ALPHA

ANALYSTS

Mukul PalEmail: [email protected]

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Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 to 100. The higher the

percentile more the chance for an asset to weaken and worst the ranking, better the chance for the respective asset to outperform. 100 is top relativeperformance and 1 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative

performer is also the worst value pick and the top relative underperformer is the best value pick. Jiseki is another name for Performance cycles, time triadsand time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations,

traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different timeframes. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our

Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy(burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Time is a social construct and we see time through the life and nature around us. Understanding time can not only give a unifying theory to research of a few

thousand years, but also help us understand the world we live in. T ime evolves, oscillates and continues. Time comes before everything, but we dont see it.We just feel it. We believe what we see and this is why understanding what we dont see is a challenge. Understanding time could bring more than a

conventional thought down, its a revolution, which could rock the very foundation of economic thought or the geometric structures Euclid laid down in 300 BC.We are at the start of the journey, but if time is indeed the real mathematics, we could see high accuracy in time forecasts.

Stop loss and exits are activated at 4%

Coverage: Global Indices. US S&P 500, European EUROSTOXX50, Russian IRTS, Japanese NIKKEI, Shanghai Index, Indian Sensex, Thai SETI, BrazilianBVSP, CNX 100 components.

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alpha global - the role reversal

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