QBE Looking Bullish

This story features QBE INSURANCE GROUP LIMITED. For more info SHARE ANALYSIS: QBE

 

The Bottom Line 17/07/13

Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Up

Technical Discussion

There has been some interesting price action since our last look at QBE Insurance ((QBE)) with the late May high being overcome by a small margin.  Remember, the ideal situation was to see further weakness taking price back down toward the line of support to complete a larger corrective pattern.  And despite the fact that slightly higher levels have been tagged our highest expectation is still to see further weakness before the next buying opportunity arises.  It may be a case that the counter trend move lower terminates just above the line of support circa $15.00 though if that region can be attained we’d get very interested in regard to a trade.  We’ll discuss that in a little more detail below though suffice to say a continuation south right here would be a bullish proposition longer term.  The line in the sand is Monday’s high, which if penetrated strongly implies our analysis is incorrect.  As we mentioned last time there is still bearish divergence evident on the weekly time frame (not shown) with our oscillator also looking overbought on the daily chart.  It’s also worth mentioning that during the past couple of weeks of strength volume has continued to diminish which tells us there isn’t a great deal of buying demand.  Price can theoretically continue to head higher without volume over the short term but without the fuel behind the move a sustainable trend simply isn’t going to unfold. 

From the high of wave-A it now appears that the flat pattern we were looking for is going to morph into the running or expanded variety.  With the trend from the December 2012 low being strong I favour the prior though we’ll just have to see how the smaller degree patterns evolve.  The only difference between the two corrective patterns is that the running flat will terminate just above the high of wave-(a) with the expanded flat terminating just beneath the low of wave-(a).  We also have to take into account that traders and investors will likely be watching the new line of support adding weight to the slightly shallower correction.  If the wave structures continue to unfold as anticipated there is plenty of upside potential here, albeit likely after seeing wave-(c) continue to the downside.  Bigger picture there is no doubting the fact that QBE remains in a longer term downtrend but the show of resilience over the past few months is definitely a big step in the right direction and cannot be dismissed.

Trading Strategy

From a trading perspective nothing changes with no reason to jump on right here and now.  Should the running flat be the correction of choice an opportunity should arise over the next two or three weeks so until then we’ll sit back and monitor only.  In a perfect world the bearish divergence will have unwound by the time a low risk entry presents itself which would only add weight to the bullish case.  In regard to a longer term target we’re looking for a continuation up toward $20.00 as a minimum.  This is where the measured move out of the trading range sits which aligns nicely with the wave equality projection – assuming the patterns continue to evolve as anticipated.  Definitely one to keep on the watch list as the stock is looking much more bullish than it has for some time.

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Risk Disclosure Statement

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