Which is the next big investment trend? That question is top of mind of every investor. And our view on that question could be very surprising: emerging markets.
In this article, we pick out the two most promising emerging markets, and discuss in the usual format: daily chart for the short term trend and weekly chart for the long term trend.
There has been a lot of pessimism surrounding China. However, there is a possibility that is misplaced, as China, along with some other emerging markets, could be the investment opportunity of the coming years.
The daily chart shows a descending triangle formation, which is about to resolve certainly in the coming months. Will China break out or break down? We do not know, but given the extreme sell off since June 2015, and the fact that emerging markets are stabilizing (read: bottoming) after a long bear market, the odds favor a breakout.
For a final buy signal, watch 3250 points on the Shanghai Exchange index, do not invest earlier. A break below 2650 points suggests a long term bear market is unfolding.
By far the most interesting emerging market on our rader is India.
It is our favorite market for 2016 and beyond. We have a belief that this will become the investment opportunity of the second half of 2016. We have said this repeatedly (here and here for instance), and have underpinned this with quite some data.
The daily chart shows a downtrend. Until that trend channel is broken, we do not suggest to take positions.
The weekly chart, however, shows that a breakout or breakdown is near. As soon as 7750 points in the Nifty 50 is broken decisively, we consider it a big buy signal with a huge potential.
We believe India should be watched very closely, and investors could become aggressive once a first buy signal is triggered.