SOFIX - Trend Channel

The major Bulgarian Stock Exchange index - SOFIX is developing an interesting trend channel.

Trendline support has been tested this week and while the index is looking vulnerable to a further plunge there is also the alternative case of the Support holding and that in sync with the global risk appetite seen in all asset classes this week following the FED's rate hike.

There is an increasing number of signs that the inflationary trade is actually in progress with treasury yields creeping higher while bond vigilantes are selling US bonds to punish the huge deficits and low yields paid - case in point USTreasury 10-Year Note gapped and closed even lower today. You can check in the blog my call on the Bond Selloff from Feb 04.

SOFIX has a critical Support level at 399/400 level as shown on the chart and the Gap support lower at 360 is a level one wouldn't want to see broken for it might signal a test of 2009 lows.

While I'd like to see the channel bottom line holding another bullish sign is the classic 20 x 50 Day MA Golden cross. RSI is slightly negative and MACD is coiling in a pattern similar to the previous 2 times the upmove started as marked.

Technical observations just help develop a scenario and define risk points - next week will see if the current setup will prove correct or a failure of the trend line support will move focus on the 400 important level.