Invest in Egypt: The Technical Outlook

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Mohamed Hassan

Managing Director & CEO at Blom Egypt Investment Introduction: ‘History Speaks’

The 2019 IFTA Cairo conference ‘History Speaks’ was a success at all levels. A series of fascinating topics was followed by a light and sound show by the impressive pyramids. Patricia Elbaz met Mohamed Hassan at the conference and we are delighted to share some of Mohamed’s research which follows ‘Invest in Egypt’ and looks at the technical outlook for a number of markets.

MSCI Emerging Markets

Emerging markets moved sharply after the Covid-19 crisis, with the MSCI Emerging Markets index reaching a new high near 1,400 points in February 2021. It then corrected gradually towards the 1,200-point support level (see Figure 1).

Figure 1: MSCI Emerging Markets rise and correction

Published on Investing.com, 21/Dec/2021 - 14:53:54 GMT, Powered by TradingView. MSCI Emerging Markets, GlobalIndexes:MSCIEF, W

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The MACD indicator confirmed the price action especially after the breakout of the zero level. The 1,200-point level is seen as the trigger for further slippage ahead (see Figure 2).

Figure 2: The MACD indicator confirmed the price action

Published on Investing.com, 21/Dec/2021 - 15:00:38 GMT, Powered by TradingView. MSCI Emerging Markets, GlobalIndexes:MSCIEF, W MACD (12, 26. close, 9)

oihfederalSeahors48161 published on TradingView.com, Dec 20, 2021 10:51 UTC Brent Oil, 1W, CURRENCYCOM 71.23 -1.55 (-2.13%) Vol 35.479K

Brent Crude

The long-term trend of the Brent Crude oil chart shows a downtrend from the 2009 peak. After the sharp fall in prices caused by the Covid-19 crisis, the price started to rebound, forming a double bottom with a higher low, confirming the uptrend in the medium term. Thus, the price reached the resistance level at USD84.50 before testing support at USD71 (see Figure 3).

Figure 3: A double bottom in Brent Crude

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Figure 4: Once again the MACD indicator confirms the price action

oihfederalSeahors48161 published on TradingView.com, Dec 20, 2021 10:51 UTC MACD (12, 26, close, 9) -1.49 1.00 2.49

oihfederalSeahors48161 published on TradingView.com, Dec 23, 2021 10:40 UTC Tadawul All Shares Index, 1W, TADAWUL 11233.460 -78.430 (-0.69%) Vol: The data vendor does not provide volume data for this symbol.

Some decline in oil prices due to Omicron is expected, which would lead to further declines in emerging markets given that their economies are highly dependent on petroleum, giving the Egyptian Stock Exchange a competitive advantage for investors to invest in Egypt.

TASI - Tadawul All Shares Index - KSA

The Tadawul All Shares Index is moving in an uptrend, following the Covid-19 crisis in February 2020 and gaining further ground due to the new IPOs in Saudi Arabia and the increase of foreign investors. However, the level of 11,500 points is acting as a strong resistance and the market is expected to correct at these levels. The market cycle was repeated three times in 2008, 2014 and 2021-2022, which means every six years. A correction is expected (see Figure 5).

Figure 5: The Tadawul All Shares Index – a correction is expected

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The MACD confirmed that the correction occurred at these levels during the periods of 2008, 2014 and 2021-2022. The new peak in the MACD could take us toward the zero level and may break as before (see Figure 6).

Figure 6: The new peak in the MACD could take us toward the zero level

oihfederalSeahors48161 published on TradingView.com, Dec 23, 2021 10:42 UTC MACD (12, 26, close, 9) -127.688 183.952 311.640

ADX General - UAE

Likewise, The ADX General shrinks in the crisis of Covid-19, then takes a sharp move up, recording a new high near 9,000 points before beginning to correct. The price action is still valid until any confirmed reversal occurs (see Figure 7).

Figure 7: Price action in the ADX General

Published on Investing.com, 23/Dec/2021 - 11:51:22 GMT, Powered by TradingView. ADX General, United Arab Emirates, AbuDhabi:ADI, W

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Figure 8: The MACD is forming a swing reversal pattern

Published on Investing.com, 23/Dec/2021 - 11:54:07 GMT, Powered by TradingView. ADX General, United Arab Emirates, AbuDhabi:ADI, W MACD (12, 26. close, 9)

Published on Investing.com, 21/Dec/2021 - 15:00:38 GMT, Powered by TradingView. ADX General, United Arab Emirates, AbuDhabi:ADI, W RSI (14)

In addition, the RSI is in the overbought area and starting to look toppish; it may take us further to dips and break out of the 70 level downwards (see Figure 9).

Figure 9: The RSI is in the overbought area and starting to look toppish

EGX30 - Egyptian Exchange Index

The main index in Egypt, the Egyptian Stock Exchange EGX30, reached a record peak of 18,400 points in April 2018 after the devaluation of the Egyptian currency. It then began to weaken, with high volatility at the top, which means that the decline happened at the end of December 2018, at the upper boundary of the major uptrend channel near the 12,500-point level.

The EGX30 kept near this level until the Covid-19 crisis hit in March 2020. It then broke the upper boundary with a sharp move to reach near the lower boundary of the major uptrend channel near 8,000 points forming a confirmed downtrend channel. The index then moved in a sideway trend between support and resistance at 8,000 and 11,750 points.

Finally, the EGX30 Index rallied to reach the resistance level again at 11,750 points with higher lows and a higher high, coupled with high volume.

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Figure 10: Price action in the EGX30

oihfederalSeahors48161 published on TradingView.com, Dec 19, 2021 13:43 UTC EGX 30 Price Return Index, 1W, EGX 11565.700 -102.000 (-0.87%) Vol 109.692M

MACD indicator confirms the price action breaking the zero level upwards. This price is expected to breakout and head towards the next resistance level at 14,000 points (see Figure 10).

Figure 11: The MACD indicator confirms the price action breaking up through the zero level

oihfederalSeahors48161 published on TradingView.com, Dec 19, 2021 13:44 UTC MACD (12, 26, close, 9) 46.565 223.641 177.076

In conclusion

We must wait for a breakout of the resistance level in order to confirm the change of trend. We expect that the long- and mediumterm investors will start to look for buying opportunities once resistance has given way. This highlights the advantages in the Egyptian Stock Exchange. After the Covid-19 crisis, the Egyptian market has been able to hold firm with high volumes and the successful economic reform programmes from the Egyptian government.