Two years of consecutive decline in Tehran Stock Exchanges main index (TEDPIX), has been a nightmare for investors of this market.
TEDPIX has lost almost 32 percent of its value since January 2014. The market collapsed after hitting the high of 89723.60 and declined to the current level of 61393.90 during two years and now the main question in investors minds is: Where is the true reversal point of the market?
In order to answer this challenging question from technical perspective, youd better have a look at the five-year rally formed from 2009.
As the chart below depicts, Tehrans Stock Exchange benchmark has started a mega-cycle upward channel from 2009 to 2014. During these five years, the index value has risen from 7949.30 to 89723.60, an outstanding growth of almost 1000 percent equivalent to 10 times of its value during this period. Considering this big image, bears a correction phase in mind which is potentially near to end in short term.
As it is depicted, TEDPIX has declined inside a bearish channel in which numbers of tries have failed to break above it. From this point of view, the main resistance is the upper channel level of 62550 which is the initial sign of trend reversal in case of channel exit. In contrary, major support would be at around 57550.40 level which plays a mid-channel role from one hand, and 50% retracement of prior major rally started from 23750,40 to all-time high of 89723.60 from the other hand. In addition, this supportive level becomes much more important when the 38.2% retrace of whole five-year rally overlaps on. (Chart below)
From the timing point of view, its apparent that we have passed 38.2% time retracement of the total rally, which is an essential period for a correction to be completed.
To conclude from above factors, it is not surprising to see the benchmark decline further in near future, although it should be considered that a big amount of previously mentioned correction has passed. So we expect that the decline would be slight, although it might be time consuming with trading days of low market value as the market players are still waiting for more clues from fundamental factors mainly including practical sanctions lifting.
On the other hand, plan B could be breaking of TEDPIX above its bearish channel prior to experiencing 57550.40 level, which as mentioned previously, can signal a reverse in market conditions and improves the chance of a correction end.