This archive report was first published on 5 September 2019.
As the Nairobi Securities Exchange 20-share index plummeted below 2,500 points in mid-August 2019, marking the first time in a decade, investors were left wondering how to navigate the bear market.
George Bodo, a seasoned investor, suggests that technical analysis can be a useful tool in such situations. In his article, he explores two indicators that measure market breadth: the advance-decline ratio and the Hughes breadth oscillator.
These indicators can help investors identify trends and make informed decisions. By analyzing the advance-decline ratio and the Hughes breadth oscillator, investors can gain insights into the market's internal strength and potentially profit from market fluctuations.
According to Bodo, if an investor had invested Sh100 in the advance-decline ratio between 2017 and August 2019, they would have generated 75 percent in total returns, excluding fees and commissions. The Hughes breadth oscillator would have generated 45 percent in total returns.
While the efficient market hypothesis and random walk theory have been advanced to explain stock market movements, technical analysis remains a valuable tool for investors seeking to profit from market fluctuations.
