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Saudi: how to play the pull back in TASI

Posted: 10/14/2012 - 4:07 pm

On October 8, we presented our medium-to-long term view on the Saudi market saying that the index (TASI) was approaching a key support zone around 6500 and that the latest pull back was setting the stage up for new buying opportunities (read: what the monthly chart is saying).

The TASI has lost 3% since then to reach a current level of 6650. With the index quickly approaching the highlighted support zone, close attention should be paid to the price action over the next few days as we look to turn short term positive at the first sign of price stability.

The market’s direction over the last two weeks has been primarily determined by companies’ earnings results and there is a good chance we get the price stability we are looking for by the end of the earnings season. Effectively, what we are looking for is exhaustion in the selling activity and a validation of some form of support before turning short term bullish.

Buying should be avoided ahead of a company’s earnings report but since many companies have already announced, select buying opportunities appear to be shaping up. For example, the banks have mostly reported and they represent one sector (among others) that has taken a beating recently and that is very close to offering entry points with attractive risk/reward profiles.

Stay on the lookout for the trade ideas on our Stock Alert service.

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