#post2409 Posted : Friday, June 01, 2018 5:59:41 PM

EAST AFRICAN BREWERIES (EABL)



EABL has bottomed at 159.82. Wave [ i .] is complete. There may be a short term move to 185 or even 174.30 but this is not necessary because wave [ii] can easily be complete at 190.20. A move above 225 in the coming days will confirm this.

If the bullish scenario plays out as I expect then EABL will likely go past 425, its all-time high.

Of course if EABL ignores us and drops below 159.82 then it will be time to re-assess our wave count. For now we are bullish.

EQUITY HOLDING GROUP



Equity appears to be on the verge of a collapse to below 33.00.

On the far right we have what appears to be a completed blue wave 1. I expect a small rally to complete wave 2 then a continuation down. The red line at 55.56 is, as always with Elliott Waves, a key resistance which should not be penetrated to the UP side.

NB: There is some price point (not shown) which suggest that Equity traded at around 400. I unfortunately could not manage to plot all that data since the program was not responsive. However the data we have above is still sufficient to make an Elliott Wave forecast which I have endeavored to do above.

Research shows that house prices are indicators of changes in the economy. In other words, the change in house prices passes information about the pending state of the economy.
The value of a house depends on the rent that the tenant pays to the landlord.
In finance, we discount rent in house values, such that when rent increases, the value of the house must also increase because additional income is being generated and vice versa.
This means that it is only in unsound economies that tenants are unable to pay rent thus opening a window for the decline in house prices.

Simply put, if a mortgage is for Sh10 million, but the house has declined in value to say Sh7 million, the logical thing to do is to default.
The default will lead to more losses in asset values and low-quality financial institutions.
This explains why debt is largely an option. The debate then is between the interest rate and collateral rates - the rate at which houses are financed with debt - which is the most important to the economy?