Monday, 13 March 2017

Lukoil (LUKOY): Inverse Head and Shoulder or Cup and Handle Formation

It seems some interesting formations are happening in LUKOY price chart.

First, we have something like an inverse H&S forming, which is very bullish. As this formation is breaking out, it quickly pulls back because of an abrupt drop in the price of crude oil (actually energy equity captured by such ETF as XLE). This quick retracement hasn't changed the bullish inverse H&S pattern into something negative. Instead, it seems to morph into a C&H formation with the handle being formed by the recent sharp pullback. It seems that the chart of LUKOY refuses to be bearish. At least, not yet. In a sense, its bullishness is simply being delayed, temporarily.

The 50d ma is turning up and within an intimate distance of kissing the 200d ma. Even a week or 2 of price stabilization should see the 200d ma turning up.

As long as LUKOY's prices could hold above 200d ma for the next couple of weeks, I'm very happy to enter a trade as this pullback provides a lower entry for those who missed the inverse H&S run.

Weekly chart of Lukoil (LUKOY) as of 13 March 2017
Weekly chart of Lukoil (LUKOY) as of 13 March 2017.

Incidentally, or maybe not a coincidence, that the Russian ETF (RSX) is showing similar price development (actually i only turned my attention to the LUKOY chart after studying RSX chart). While one might think that the similarity between RSX and LUKOY charts are due to the fact that oil is such an important part of Russian economy, but oil is only made up of 15% of this ETF. Furthermore, LUKOY only makes up of 7% of this ETF (the other oil company in RSX is , of course, Gazprom (OGZPY), which represents 7.3% of the holding, and has a very different - and not so bullish - chart pattern).

Weekly chart of Russian ETF (RSX) as of 13 March 2017
Weekly chart of Russian ETF (RSX) as of 13 March 2017

We know that Russian economy and share market is turning around from a deeply oversold level. Russia ETF and companies should provide lower risk entries.

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