MAJOR COUNTER RALLY UNDERWAY IN OVERSOLD AUTO SUPPLIERS
After major SHORT gains in 2018, we were fully expecting a counter rally / consolidation in the SII: AUTO - SUPPLIERS Watch List positions. It has been underway across the whole sub sector since year beginning. This week we have seen another leg:
- Six of the Top 8 Price Gainer in the MATASII Watch List (more than 150 securities) over the last week have been Auto-Suppliers,
- This has been fully expected (see Visteon chart below) after we reached "double bottoms" support at year end 2018,
- The Longer Term Trend however is STILL NEGATIVE, and as such this may present some portfolio allocation opportunities.
- We have a "Double Bottom" Support level (see dotted black trend line),
- Watch Fibonacci Retracement Levels closely,
- Expect the 20 / 40 / 80 WMA to more "tightly couple" before the counter rally is complete,
- The Counter Rally may take the form of a simple "a-b-c" or a Continuation Triangle "a-b-c-d-e",
- Elliot Wave "Alternation"suggests the pattern will be an "a-b-c-d-e" Continuation Triangle.