Emerging market has become big investment theme in 2017. And now everybody sounds super bullish but if you look at last twenty months journey - it has been nothing less than extraordinary. EEM is now up 59% in last 20 months
Yes this is how it looks:
Here's how it all started
EEM made a bottom in Jan 2016 around price of 28
EEM Emerging market made a big candle move in Feb 2016 and then for long time created a solid base at 32 before making another move between July and September 2016 - when it rallied to 38. EEM was looking good again but then Donald Trump won US election and talk of deglobalization resulted in massive selling in EEM and it gave up lots of gains of 2016 by end Dec. Even after giving up gains: EEM delivered 21% gains in 2016. It was a slow and painful move
Lesson of the Day: Everybody wants to be early in the game but the best gains come once the trend is truly established.
Let us look at the journey in 2017 when EEM started building on the gains of 2016
EEM took support at 200 dma at the start of the year and then made a big move with consistently taking support at 50 dma. EEM is now up 27% Year to Date.
Is EEM now in Bubble?
You will be surprised to know that EEM is right now at critical resistance point of 45 which it has not crossed since 2012. So, no there is no Bubble as such. But yes, there will be urge to take profit as EEM approaches important line of resistance.
Yes, EEM has delivered 60% returns in 20 months but this is also the fact that EEM has not delivered any returns since 2012. What's bad - No returns in 5 years or Too much return in 20 months?
I have covered Emerging Market several times in last 2 years
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers