| Burberry - China Proxy an extract from Lessons From The Financial Markets For 2013 by Zak Mir of Zaks-TA.com
Burberry - China Proxy 2012 Price Action Taking the first half of 2012 in the first snapshot of Burberry, it can be seen how the shares were flying almost from the start of January seeing support first coming in at the blue 50 day moving average and then above the 200 day moving average, a sign that this was a stock in prime bull mode. Indeed, from March there was a gap through initial February resistance at £14.64, another show of strength. What was interesting in terms of the full March/April pattern on the daily chart here is the way that there was essentially an island top within an island top. The particular stand out was the final three-day island top from the 12th to the 16th of the month, the signal that was also a narrow bull trap above the former March £15.86 intraday high. Adding to this combination of sell signals was the final one in May. Here the stock failed to deliver an end of day close back above the April island top gap at £15.61 peaking out at £15.48. From then on you might have expected it to be curtains for the stock, and this is more or less what we saw. However, it was a rather rocky ride, with £14 coming in as support in April, and £13 appearing to mark the bottom in May. But there was even more to come after the exhaustion gap to the downside in July was filled above £12.59 on 19th July. Following this the story here was that an August/early September island top above the blue 50 day moving average then standing just above £13 came into play. The gap down through the 50 day line on 10th September should have taken the shares on down for a fresh decline every bit as painful as that scene between April and July. But the longs were let off the hook by a very unusual cup and handle formation set against a vast gap to the downside which had its floor at £11.30. This became the base in terms of a hopeful salvation from Burberry shares - their equivalent of what the soft landing would be for the Chinese economy. At least from that moment on in late October the bulls knew that they had to fill the September gap through £13, which remains unfilled as of the end of November. CLICK HERE TO BUY A COPY OF LESSONS FROM THE FINANCIAL MARKETS FOR 2013 FOR JUST £4.11
Even going into 2012 it was the case that Burberry was the leading blue-chip proxy for the Chinese economy. This may be unfair given the geographical distribution of the business, but as even I was happy to make the link between China soft landing/hard landing and the luxury goods group, this link is one that will last quite some time. This is particularly the case given that I do not believe that China will be able to avoid its GDP growth heading below 5% over the next couple of years, even if the great miracle in its economy revives after that. As for Burberry, it is a long-term growth story, but the China wobble factor needs a little more time to play out, perhaps even longer than the next year. The UK's only serious Technical Analysis focussed website Zak Mir is one of the UK's best known and experienced technical analysts, having over 2 decades of charting experience. As well as being a best selling investment author Zak's day to day job is running his website, Zaks-TA.com. Every working day Zak sifts through scores of stock, indices and commodity charts in order to find the best trading ideas for his subscribers. He uses a variety of technical analysis techniques to study the major markets and individual stocks of interest, providing subscribers with dozens of updates each week covering gold, indices, US stocks, blue chips and red hot penny shares as well as forex calls. Since the site was founded in 2001 Zak has served up more than 10,000 hours worth of his charting expertise. CLICK HERE TO CLAIM YOUR FREE ONE WEEK TRIAL TO ZAK's-TA
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