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Friday, 16 November 2007 |
Chinese gaming operations firm The9 Ltd. is the only operations company in China which delivers the popular World of War Craft to the Chinese server participants. With the popularity of games, especially in the far east, we decided to do further research on the trend of The9 Ltd.
If you have been doing any research on this site, we hope you notice something significant taking place here! If you take a look at the Money Flow Index (MFI), you can see an upward trend - this is symbolic of an upward trend in demand. Also notice the volume bars have been rising. Together, both of these suggest a reversal with a bullish break. This is known as positive divergence because the indicators are rising while the price has been declining.
Below this chart we have added a momentum indicator - a 28 day Rate of Change (ROC). Since the most powerful way to use the ROC indicator is through divergences, it is clear that it is pointing to another bullish indicators. We also plotted a 39 day Slow Stochastic indicator. Right now it looks as though the Red will be crossing above the Black to create a bearish indicator, but let's see what happens in the next few days.
Finally, we compared The9 Ltd. (NCTY) with one of its leading Chinese gaming competitors, SINA. By doing this we are creating a pairs trading system. Since SINA - indicated by the black bars - leads NCTY (or after it makes a move, NCTY soon follows the same move), we can create our entry point when SINA hits a high. The ideal is when SINA hits a high while NCTY hits a low. What we are looking for is a rubber band effect: SINA hits a high, and since both securities are in the same industry and SINA leads NCTY in trend, NCTY will hit a high next after SINA.
Stay tuned to what happens next with NCTY. This may be a big break.
Tags:
analysis chart,
bullish stocks,
chart pattern,
Divergences,
investing strategies,
Market Commentary,
market timing,
market trend,
momentum trading,
Technical Analysis,
techniques trading,
trading indicators,
trading strategies,
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