Greek Stock Market: Long term trading analysis

Going long and buying Greek shares looks like a good long term investment at the moment. According to technical analysis there are strong indications that the downtrend has most probably come to an end and a reversal is imminent. If I were a long term investor, I would look to buy some well known stocks and predict a long uptrend that is just beginning. Besides the risk/reward is huge at this point, as the stock prices might double or even triple up!

If you are a loyal reader of my articles, you already know that I’m not a big fan of trading in the Greek Stock market. However, I can’t neglect this occasion, which I think offers tremendous value for the long term stock trader. The Greek’s Stock Exchange’s index has formed a fail bottom, a strong reversal candlestick formation during June and there’s MACD divergence, not so usual in that kind of graphs. Additionally the volume is getting lower every day, weakening the downtrend. The stock charts do look pretty much the same with this graph and almost in every big capitalization’s stock chart there is MACD divergence and either Double Bottom or Fail Bottom. Trading analysis does favor entering long and holding position for a long time.

As far as proper money management concerns, you should set a stop loss between 5 or 10% of the stock prices. If the stocks fall 5% or more the next days it’s time to exit the market and wait for a better timing. It would mean we are wrong in our prediction and when such strong reversal indicators fail, the continuation downtrend would be even stronger. No time to lose, take our losses and move on. In this worst scenario, you should calculate the number of traded shares so that you don’t stand to lose more than 2% of your trading capital. If your stop loss is set at a 10% drop, you should exit and lose 2% of your capital in each trade.

On the other hand though, if we are indeed correct in predicting a reversal and the stock market in Greece enters a long term uptrend, witnessing 100% or even 200% price rise over the next months wouldn’t be such a surprise. For that reason I believe the risk/reward ratio is very favorable nowadays.