WIG - Resistance becomes supportGreetings to you all! I decided to mix journalism and technical analysis in this post. I will describe the last 20 years of price action in Warsaw Stock Exchange Index (WIG), laying out the market structure and how it was shaped by key geopolitical events. Keep reading till the end, because the key message is that decade-long resistance level might have become a support zone, and Polish stock prices could be well-positioned for future growth.
Warsaw Stock Exchange Index (WIG) has declined during 2008 financial crisis, after reaching all time high of 67,772 PLN. This price level created a resistance that scared off any early advances and pushed away subsequent rallies. 2017 and 2021 brought 2 attempts that failed to break above the resistance. The first rally did not quite have the momentum required to push the price higher, and the buying power vanished over the next 2 years. 2020 brought crisis and a steep decline in price, which was followed by a quick recovery through 2021. Price managed to close above ATH during July - December period of 2021, but it was short lived. Rising interest rates in 2022 and high inflation growth over the last 12 months resumed the pessimistic tone markets have followed in the aftermath of the covid pandemic, resulting in price falling back below the resistance, which remained intact at 65K - 75K PLN level.
It is important to mention that 2021 rally changed the character (CoC) of the established market structure post 2008 crisis, because price closed above ATH and set a higher high. Now, if I consider a local market structure of 2020 - 2024, I can clearly see a basic uptrend pattern of Higher High > Higher Low > Higher High, which is confirmed by both MACD and RSI indicators on monthly chart. Collectively, the 2020-2024 price impulse broke above the decade long resistance, which may now act as support, but, if you're a careful observer, you would notice that this happened as well in 2021. Why this time is different? Because consider the broader economic context, and you'll also notice that in 2024 inflation is seemingly under control (though above the target rates). Moreover, central banks kept the interest rates pretty much flat in 2022, and some even proceeded to cut them, lifting capital restraints affecting companies.
Hence, overall picture for WIG looks quite optimistic. It gained 27% in the last 12 months, broke above strong resistance, and it did so by establishing an uptrend price impulse. Meanwhile, Polish currency appreciated by ~5% against dollar and rose to #6 economy in Europe as of 2023. It grew twice as fast as top 5 economies both in 2023 YoY and during 2020 - 2023 period. I guess I will add some WIG to my portfolio, it looks good to me. But you decide for yourself, I'm not a financial advisor and this is not a financial advice. Thanks for reading this post.
