A Major “Buy” Signal On Italian Stocks

Italy stocks

Hated, unpopular and dirt-cheap… But for the first time after 4 years we are now seeing a new “Buy” signal on Italian stocks (see video):

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22 Comments

  1. Scott Orlando
    May 14, 2013 at 12:44 am

    I think you are right on about the bottom. It is similar to the US market, except the US market never retested their lows in 2009. I think the first level of resistance on the way up will not be at the FIB level but the trend line of connecting the tops from 16 Oct 2009 and 29 Apr 2011.

  2. chris giovenco
    May 14, 2013 at 2:14 am

    hi allesio,
    thanks so much for your video as always.
    if you are thinking there will be a rally in Euro indicies such as Italy surely this will be positive for most indicies around the globe?
    im from australia and i find it very itneresting that we are sitting about 5200 level on the asx200 but we are breaking record highs on the Dow and SandP.

    As always thanks again

  3. Gryphon
    May 14, 2013 at 2:40 am

    Alessio,

    I really enjoyed this video, however I would appreciate your insights on two points:

    We saw a similar price floor break for gold and silver – can we really be so confident there is support at these 9.00 lows? (Arguably there was some interesting unwinding going on in that instance)

    And, we may have found the bottom in the italian market, however in the United State we are making new highs in the S&P and DOWJs, aren’t we due for a correction? Won’t a large correction in the United States effect European markets?

    I think my point here is that I’m in fact fearful because others are greedy – perhaps just not in the EU.

    Thanks heaps for your website and videos. They’re always very insightful and very appreciated.

    Regards,

    Gryphon
    Commerce Finance Student
    Sprott School of Business

  4. george michaelides
    May 14, 2013 at 3:16 am

    Makes alot of sense to me based on all the material you taught us – Greece may be next!

  5. Dino Manca
    May 14, 2013 at 3:37 am

    Hi Alessio,

    interesting analysis. From a technical viewpoint it is plausible that the trend has reached a bottom and could be bound for a reversal. From a fundamental angle, however, I am not clear what will be pulling this reversal, considering the opaque state of the Italian economy, including its current political coalition which in my view should not last very long, with the potential for creating further uncertainty in domestic and perhaps European markets. Clearly, there is something the charts are picking-up that is not yet translated by events. I would like to be able to reconcile these two views.

    Regards,

    Dino

  6. russell
    May 14, 2013 at 5:10 am

    Hi Alessio
    Liked your video on the Italian market and I agree with your overall thoughts however, from having a quick look, I think you could be 6 months or so too early. I think it’s in a C leg down and could be forming a large Falling Wedge and therefore we need to see a marginal new low to see the pattern complete.
    Regards
    Russell

  7. Tom J. Byrne
    May 14, 2013 at 5:45 am

    Instinctively, I agree with this. I’m in Italy and they are not letting the gloomy outlook effect them on a day to day basis (whatever the economic news might be). The country has great gold reserves. They have a good supply of fresh food and don’t eat much processed nonsense. It’s a dynamic country and historically, they throw the wild card more times than not.

    My totally illogical analysis but I stand by it.

  8. Jeremy P.
    May 14, 2013 at 12:13 pm

    Hi Alessio,

    Intriguing video and you certainly make a compelling case for reversal. However, I also see a downward wedge forming and possibly that might have to play out. With ETFs it’s tricky to view the long term trend as they start in the middle of history. therefore it’s also posible that Italy takes another dive and the ETF hovers near zero for a long time. Nothing any of us have to worry about thought.

    Thanks for the heads up!

  9. TheWalkingTrade
    May 14, 2013 at 12:36 pm

    Sorry but the US market goes up because of the cheap money Federal Bank spread at a rate now of 85 Billions a month. This is not a market but a ill thing under perfusion. And it delays only the its death.

  10. Rey
    May 16, 2013 at 12:25 am

    Great video, thanks for sharing your perspective of this over-looked market, still suffering from the PIGS nomenclature. Will it rebound? I don’t know, but from a purely technical standpoint your case makes perfect sense to me…as a trader, one must trade what one sees and the chart says BUY!
    Time will reveal the rest!

  11. Gerard
    May 17, 2013 at 11:48 am

    Interesting video, first thought was to be aware of “bottom fishing”only to find after purchase that the current range was a “continental shelf’ and falls followed. Would like to see another rising high and low, and a rising trend established. After reading an article in the Daily Telegraph, Spain may be worth a look.

    Thank you for your trading insights. Working my way through the Ultimate Guide To Technical Trading which arrived the other day.

  12. Alessio Rastani
    May 26, 2013 at 9:44 am

    Thanks Gerard. Yes that is a good point. A break above the recent highs could give a better confirmation of an upward trend. Although I am more looking at the value side of things so I don’t mind buying it at the next pullback or correction. Spain, yes maybe that too.

  13. Alessio Rastani
    May 26, 2013 at 9:48 am

    Rey – yes excellent point. There is a good case in favour it from a fundamental and technical view point. And yes as you say, trade what you see! Cheers.

  14. Alessio Rastani
    May 26, 2013 at 9:51 am

    Perhaps. There is no doubt that US Stocks have been bolstered by the QE of the Fed. However, Italy is an undervalued market with a PE ratio lower than its competitors. And from a technical aspect it is showing a bullish reversal. So all things said and done, it is worth taking a stab at this market. cheers.

  15. Alessio Rastani
    May 26, 2013 at 9:53 am

    Hi Jeremy – many thanks for your feedback. Yes actually I am expecting a “dive” or correction to its recent rally (on the Italy index or ETF). That is actually a good thing as I intend to go long on that correction. There is a wedge as you say, that may pose as resistance in due course, but I am looking to be in this over the long term. All the best, Alessio

  16. Alessio Rastani
    May 26, 2013 at 9:55 am

    Thanks Tom for your feedback on Italy video. I am glad you gave another perspective on the Italian economy – since you also live there that is certainly useful. I am not as pessimistic as others on Italy – I think the tide is turning. All the best Tom, cheers.

  17. Alessio Rastani
    May 26, 2013 at 9:58 am

    Hi Russell – yes you may well have a good point there. However, I am looking at Italy from a “value” point of view – as in I believe it is a quality market that is greatly “undervalued”. I think you are approaching it from a more trader “momentum” point of view – which is perfectly valid (and I see your point). From an investing point of view, I like to buy stocks when nobody wants them – and specially when the risk to reward ratio is excellent. Italy in my view has small risk (as the support is very close below) and lots of upside potential (reward). Hence, I am not too concerned about all the technical aspects of it. But I am going to wait for a correction before I buy. Thanks for your comment and feedback – cheers!

  18. Alessio Rastani
    May 26, 2013 at 10:03 am

    Hi Dino – I see your point of view. And you do make a good point. However, as an investor I have come to agree with the great investors of our time like Buffett and Lynch, that we simply cannot know in advance what the market will do next. Nothing about the present state of the economy (or Italian economy in this case) can tell us what the stock market will do next. All we have are our analytical tools – and in this case the technicals AND the fundamentals seem to indicate that Italy is “undervalued” – has a low risk to reward – and is most probably making a “bullish reversal”. That is all we need (and all we realistically can have) to make an informed decision to buy. Trouble is that by the time we wait for the Italian economy to improve, it’s stock market will be significantly higher and it will be too late to position yourself for a good buy. Cheers.

  19. Alessio Rastani
    May 26, 2013 at 10:03 am

    Thanks George – yes perhaps Greece will be in our radar at some point.

  20. Alessio Rastani
    May 26, 2013 at 10:06 am

    Hi Gryphon – yes you make a very good point. We are due for a correction on US Stocks – and certainly when that correction happens, the Italian stocks will most likely make a correction too. So I am quite prepared to wait to buy them cheaper at the next support. Am I sure that $9 level will hold for Italian ETF? No. Nobody knows that. But from a risk/reward perspective it makes sense, as you have low risk (support is close) and large profit potential (reward). Thanks.

  21. Alessio Rastani
    May 26, 2013 at 10:08 am

    Hi Chris. Yes Australian markets are on my radar too. I am not sure if Italy’s rally or potential rally will have an impact on other euro indices. It’s possible but I doubt it. The major players at the moment are going to be US and Japan. But we’ll see.

  22. Alessio Rastani
    May 26, 2013 at 10:09 am

    Thanks Scott – yes that is a good point about the resistance. Worth watching that level. Cheers.

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