A German Opportunity – Take II

• Posted by Greg Harmon
• on February 7th, 2014

A little more than a week ago I noted an opportunity in the Germany market in A German Opportunity. The set up ended up failing so I took my stop loss and moved on. But I remain interested in the German market and see it gave another buy signal Thursday. And this one comes with some added firepower behind it. The chart below shows the bottoming that took place earlier this week at the 100 day Simple Moving Average (SMA). The two doji candles followed by a confirmed reversal Thursday. This offers a trade opportunity against a stop under Tuesday’s low. The technical momentum indicators are mixed with the MACD continuing lower but maybe flattening, while the Relative Strength Index (RSI) has

bottomed and turned back higher. And this is where is looks better than the previous set up. This time the low in the RSI was below the low in the RSI in December, but the low in price was higher than the December low. This is called a Positive RSI Reversal and it targets a move higher equal to the last move, or in this case to 9881. That makes for a reward to risk ratio of 3.37 to 1 against the previously mentioned stop. This translates to the German ETF $EWG as stop around 29.10 against Thursdays closing price at 30.10 and looking for a new high over 31.93.

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