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It has been hard to find a silver lining among all the doom and gloom of the recent months, but I believe I have found two.
Indian Autos and Health are sectors with upside prospects in the coming months. Both sectors have great prospects in the longer-term as India should continue to be a star economy for many years - even decades - to come, far outstripping growth in the West.
The charts below are simple 90-day count weekly line charts showing an oscillator with an Elliott overlay using ProfitSource software. They have a similar pattern but it is worthwhile examining both.
click to enlarge
click to enlarge
Both have completed a Wave Four low and are ready to make an attempt at Wave Five in coming months. It is important to note that the likely time span for this could be months, so you don’t need to jump in immediately. Stalk the sector, stalk the stocks in the sector and buy on the ‘off’ days and weeks.
The 300-day count weekly line chart (a big time outlook) gives another perspective of the time period over which the next move higher should occur:
click to enlarge
So while it could be mid-2012 by the time it all happens, I believe we will see a high before then.
One proviso in the above charts is that we have seen some vacillation. Both sectors have been in a range trading mode for some weeks, in keeping with volatile global markets. But importantly, while other markets have fallen, both these sectors have held their ground, which is a positive.
This vacillation is confirmed in the oscillator, which has been moving around the zero-base for most of this year. This indicates a tepid climb higher rather than a robust rally to Wave Five. It should get there eventually and there is nothing wrong with quiet moves to the top - they are easier to understand and less risky.
Finally, make sure you have stop-losses in place in case of a nasty surprise.
Enjoy the ride
Tom Scollon
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