Is Indonesia The Next Tiger Cub To Break Out?
The “Asian Tigers” moniker, as many investors may be aware, refers to the economies of Hong Kong, Singapore, South Korea and Taiwan. Lesser known perhaps are the “Tiger Cubs”. These are less-developed, but presumably wanna-be “Tigers” and consist of Indonesia, Malaysia, the Philippines and Thailand. We highlighted the rcent breakout and potential upside of the Philippines’ market last Friday. Today, we spotlight another Tiger Cub that may be hot on the heels of the Philippines: Indonesia.
Like the Philippines, Indonesia bottomed in 2002-2003 and has been in a secular bull market since. After forming a low in 2008, the Indonesia Jakarta Composite rallied into May 2013, topping around the 5200 level. After retreating from that area for the balance of 2013, the index tested those highs in September 2014 and again at the beginning of this year, forming a variant cup-&-handle. As we mentioned in the Philippines post, this action serves to chip away at former resistance before presumably breaking out to new highs. Whether or not it does indeed break out is the question. We’ll also repeat our oft-issued warning on recent “breakouts” since false breakouts have been as commonplace as successful breakouts.
Should the Indonesia Jakarta Composite eventually break out, initial further upside, based on the following confluence of Fibonacci analysis, could be in the range of 20-30% to the 6200-6800 levels:
- 161.8% Fibonacci Projection of 2002-2008 Rally ~6800
- 23.6% Fibonacci Projection of 2008-2013 Rally ~6200
- 38.2% Fibonacci Projection of 2008-2013 Rally ~6800
- 161.8% Fibonacci Extension of 2013 Decline ~6100
- 200% Extension of 2013 Decline ~6700
We do not like to anticipate breakouts. Therefore, we will keep a close eye on Indonesia in coming days and weeks as to see if it can follow fellow Tiger Cub, the Philippines, into all-time high ground. If it is successful, it too could be in the mix for a potential 2015 stock market of the year run.
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