OMXS30 about to bottom out…?

OMXS30 about to bottom out…?

20. kesäkuuta 2017 Autor Tradingportalen

OMXS30 could find support from buyers during increasing trading activity, if the index would find ground above resistance around 1657. In this case the index might be looking at 1700-1720 up ahead. This week could be a week of lower activity, according to season patterns. This is increasing the probability that the index will consolidate this week around technical support level 1600, and around resistance 1657. The index could even break lower, if sellers would start to find momentum. We will have to wait and see. Should the index break below 1600, we consider this as a potential negative move. The U.S dollar, the long-term rates and volume patterns are showing potential signs of weakness. The long-term trends are still considered to be strong, and signals that OMXS30 could sooner or later have a high chance of moving higher. If this is the case, momentum might as well pick up even next week if we are lucky.

Last week Nasdaq OMX traded lower, during relatively low volatility compared to the previous week. OMXS30 fell -1.1 percent, and closed the week at 1635.94. Since the beginning of the year, the index has gained +7.8 percent, and +11.2 if adjusting to dividends.

Weekly chart of the OMXS30 between the 8th of June 2012 and the 16th of June 2017                              source: Aktiespararna

Last week the U.S central bank, the Federal Reserve increased the rates by 25 points, and was a bit bearish when highlighting another rate hike later this year. Janet Yellen also highlighted that a potential lowered balance sheet could be on the table, in a not too distant future. Maybe this could be a potential trigger for the U.S dollar to start gaining strength, which is currently falling and puts a risk of lowering the sentiment in the market.

Another negative development in the market was the index heavy H&M, which despite large buying from the Persson family, continued to move lower.

From a long-term perspective, the trend is still believed to be showing strength in OMXS30. The index is slowly moving higher, and is making higher highs, and higher lows. The long-term 200-day moving average is also showing strength.

Daily chart of the OMXS30 between the 30th of January 2017 and the 16th of June 2017                              source: Aktiespararna

Based on a more short-term perspective, the OMXS30 index is still trading within a consolidation, between technical support area around 1600, and resistance around 1657. Last week the index challenged resistance, but was never trading higher than 1657.2, which also turned out to be the turning point, as the index did not have the strength enough from buyers to keep trading at this price level.

Should OMXS30 later on find ground above 1657, especially during a time when the trading activity is relatively high, and the market turnover is well above 20 billion per day during days when the market moves higher, this could potentially be the sign we are looking for, in order for the market to move higher towards the area around 1700-1720.

However, this week we are not having too much expectations. According to our season patterns, this week might be a week of lower trading activity, with a turning point around midsummer weekend. After this period, the trading activity could turn out for the better. The market could gain momentum, and potentially reach a top around July or around August. However, we will have to see if the market follows this pattern this year, because even if this is often the case, it does not have to be the case this year.

Should the OMXS30 index close below last week’s low around 1616, we would consider this as a potential sign of weakness. In this case it would increase the probability that we might move as low as 1600-1604. Should the index find ground below this support area, especially during increased trading activity, this might be an even stronger sign of weakness. In this case we could potentially be looking at a move towards 1685, or as low as support area around 1540-1544.

Stochastic-indicator is trading within a neutral position, and is not giving any clear direction, if the market would breakout higher, or lower…

Even so, we believe that we could be looking at a positive breakout, since the long-term trend is still considered to be positive. As a lot of market investors quite often say, “the trend is your friend”, and this is no exception.

Potential signs of a lower breakout, is the hesitation in the volume patterns, and the weakness in the U.S dollar and interest rates the last month.

It will be very interesting to see, if the market would give a higher breakout and move above 1657, or if we would get a lower move because of a breakout below 1600…

No matter what the direction will be, we will keep a closer look if these breakouts happen during increasing trading activity or not. An increasingly higher activity could potentially be giving signs of a stronger signal, and vice versa. During lower activity during breakouts, is not uncommonly signs of false breakouts.

Hourly chart of the OMXS30 between the 22nd of May 2017 and the 16th of June 2017                              source: Aktiespararna

For the more short-term investor, we keep a closer look at the support levels around 1630, 1626 and around 1616, as well as a resistance level at around 1638, which is present in the hourly chart above.

Potential signs of strength, might be if the index find ground above resistance at around 1638. This could possibly be a sign of a move towards resistance and yearly high at 1657. If the index would start moving below 1630, this could instead be a sign of weakness, and we would then keep a closer look at towards 1626, which could potentially indicate a move towards 1616, and 1600-1604.

Even if the long-term view is still considered to be positive, potential signs of weakness has occurred the last month. Volume pattern, the U.S dollar and long-term interest rates all show signs of potential weakness.

Should OMXS30 close above resistance 1657, during an increasingly higher trading activity, this could potentially be the sign of strength, that could indicate a move towards 1700-1720.

 

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25.1.2020 5:56:45