Iran is very well known for its petrochemical industry among countries around the world and in Mena region as well. Producing millions of barrels of petroleum and other relevant liquids per day, the geopolitical location to access international waters, existing infrastructural facilities in the country along with the growing local and emerging markets have made Petrochem as the most important and driving engine of almost all local industries in Iran. Moreover, in terms of market capitalization, petrochemical industry is the largest sector in Tehran Stock Exchange (TSE) which forms almost a quarter of its market cap. All mentioned advantages plus a lot more, makes it an important must-to-analyze industry to have an outlook of.
Below is the technical analysis of the petrochemical industry’s index as a benchmark of all listed companies trading in Tehran Stock Exchange.
Picture below depicts the whole-life chart of the sector INDEX with all major and minor pivots forming a bullish channel on a logarithmic scale.
The lowest channel line is drawn hypothetically based on assumptions which will be discussed later on.
As it is shown, the two years of decline has stopped by a break above the bearish channel (drawn in red) following a pull back as an approval and an initial sign of trend change.
Looking more precisely to this zone clearly shows the willingness of forming an upward trend as valleys don’t penetrate their previous peaks.
The near-term supportive zone is believed to lie at 4900-5000x as this area overlaps on 50% retracement of the recent move from 4300x to 5550x and also a pull back to 100% Fibo extension ratio after an unstable touch of 161.8% ratio from the same Fibonacci. Combination of these factors with the newly formed short term trend encourage us to draw the lower channel line passing this area. From the timing point of view, a correction of 46 trading days is getting close to 61.8% retracement ratio of its previous rally (lasted for 85 trading days) which in our belief, will probably act as a reversal time to resume the bullish move. All these are shown in bellow:
To conclude, it is considered that the current decline on the Petrochem INDEX is a corrective move yet and as long as the 4790x zone is not penetrated, a high probability of forming another rally still exists. A move above 6440x zone is an approval sign of so-called scenario in this case.