As it was mentioned in our previous technical report dated on March 7th this year, the TEDPIX -Tehran’s Stock Market Total Index- ended its two years of consecutive and frustrating decline on January 6th, 2016 by breaking sharply above its downward trend line and soared to 81,750 peak from 62,380 low, equivalent to more than 30 percent of gain in less than three months. This outstanding performance, followed by several failed tries to hit a new high which afterwards triggered a correction to start down to 75,915 mark. Below, we are going to find out whether or not the so-called correction is near to finish.
Picture below depicts TEDPIX’s all-time chart. All major and minor pivots overlap channel lines as shown on the chart. It is noteworthy that the nearest support zone lies on 76,000 area, the channel line drawn in bold. Zooming in this zone reveals more supportive clues which are going to be mentioned later on.
From the timing point of view, we have retraced almost half of the move since beginning of the impulsive wave started on December 27th, 2015. This bullish move lasted for 62 trading days which is an important Fibonacci series number. Either 50% or 61.8% of time retracement is suitable for a classic correction to end.
From the price perspective also, an ABC form correction pattern can be recognized with an extension ratio of 61.8% which increases the odds of a reverse on this zone, along with the trend line around 76,000 mark. If this zone is held, a strong move above 77,400 mark is needed to confirm that the correction is over, otherwise, the next support level at around 74,200-74,500 level might be the next target. This mentioned area is 100% ratio of Fibonacci extension (from so-called ABC pattern) overlapping 38.2% of retracement. These levels are shown in the picture below:
Adding to all previously mentioned factors, the MACD oscillator (in picture below) is also capable of forming a positive hidden divergence which increases the possibility of a trend change on TEDPIX.
To conclude from all above factors, we believe that the bullish trend on TEDPIX is still intact and the recent decline on the index is a correction which does not have a long way to go as the time of support is near (first picture). On the other hand, a sharp move above 77,400 level confirms this scenario to be true. It should be mentioned that this view-point is considered to be valid as long as 69,000 level is held on.