How to Create a Stocks Portfolio.
To create a stocks portfolio can become from a simple task to a complicated process. There are many ways to build a portfolio which can be for example:
- Sympathy for the company aided by social media, for example, Facebook, Apple.
- Market capitalisation, for example, the market capitalisation has to be higher than 10B.
- Using the technical analysis perspective, for example, chartist analysis, Elliott wave analysis, or another analysis method.
The Power of Relationship.
Another way to create a portfolio is analysing the relationship between different assets or markets. The relationship to be used is between different markets, i.e., commodities, stocks, currencies and indices.
Application in the Oil Market.
The application is based on the relationship between Brent Oil (BR) and some oil companies listed on FTSE 100 (UKX). The Oil companies considered are Royal Dutch Shell (RDSB) and British Petroleum (BP).
The chart represents the relationship between the Oil Brent, Shell and British Petroleum. In one hand, we observe that RDSB and BP move in the same direction that BR. In the second hand, the two oil companies can be candidates to create a stocks portfolio based on the Brent Oil price movement.
The Forecast
As we commented in a previous post, we foresee more drops on the Oil group (click to read more). The BP daily chart shows that the declines could continue with a bearish target between 490.7 and 459.4. From this area, British Petroleum could start a new bullish cycle. The Invalidation Level of the bearish cycle is at 570.9.
In the same way that BP, Royal Dutch Shell in the daily chart is making higher lows, and lower lows, the consolidation below 2,466 could activate new bearish targets between 2,215 and 2,076. The Invalidation Level of the bearish scenario is located at 2,725.5.
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