Is the INK Index Quietly Building up a Head of Steam?

Mon, 09/28/2015 - 1:18 am Nicholas Winton, High on the Hog

Technical Overview by Nicholas Winton, Hedgehog Trader and @HedgehogTrader on Twitter

Thank you for joining us in our weekly technical look at the mid-cap oriented INK Canadian Insider (CIN) Index. Since our last update the INK CIN Index has maintained its resolve and has refused to break down. In fact, having bounced off the 985 level, the Index is making incrementally higher lows and continues to consolidate ahead of a final resolution (shown by the two converging black lines). What's more, even though its Relative Strength Indicator has not climbed above the 50 level (which I think is needed for a breakout), its RSI is also quietly and bullishly, making higher lows. Meanwhile, it's the same story for the Index's MACD signal which bottomed in late August and has climbed steadily ever since.

Now, while the Index's lack of forward progress may make it appear weak or prone to further correction, the sort of underlying positive divergence our indicators are showing is generally a reliable precursor to a bullish trend change. In fact, the general rule is that the lengthier the consolidation is: 1) the stronger the underlying support becomes and 2) the more powerful the resolution will be. Given that, it's interesting to note the length of consolidation has now reached a month, a considerable length of time in this age of high-frequency trading and instant information.

The longer the INK CIN Index remains in a consolidation pattern, the greater likelihood we'll see a break out, resulting in a move of significant size. The index is likely to choose a clear direction fairly soon as it is rapidly closing in on the two converging black trend lines. Major support for the Index is defined at 980-985 with minor support at 960, while next resistance remains is at 1020, and major resistance resides at 1060.

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