Column: ”OMXS30 about to break out?”

Column: ”OMXS30 about to break out?”

24 April 2017 from Tradingportalen

OMXS30 is currently about to break out, from a longer period of time from consolidation. Strong buy signals are triggered if OMXS30 should start trading above 1578, 1585 and around 1591 during high volume. Especially if we start trading above 1603. The long-term trend is still positive, and the volume pattern are showing a momentum of such a scenario. However, sell signals are triggered if the index should start trading below support level around 1540, 1526 and around 1499.

Last week Nasdaq OMX showed little movement, during a one day shorter trading week. OMXS30 gained half a point, and closed the week at 1573.24. Since the beginning of the year the index has gained +3.7 percent. Adjusted for dividends, the index has gained 6.1 percent, since the beginning of the year.

Earning reports snuck in during last week, ABB being the first within OMXS30. This week the report season is really kicking off, with Electrolux, Ericsson, Getinge, Investor, Kinnevik, Nokia, Nordea, Sandvik, SCA, SEB, SKF, Handelsbanken, Swedbank, Tele2, Telia and Volvo. With other words, most of the companies listed within OMXS30.

Currently the first round of the French election is done, and Macron and Le Pen moves on. This is positive for the market, even if it was in line with estimates. The second round will be held 7th of May, and Macron is estimated to win in this case. This will lead to satisfaction, and the market can be at ease.

Currently OMXS30 is consolidating, considering the last few weeks of development. Short term interesting support levels are around 1572, 1552 and around 1544. From a little longer timeframe, support levels around 1540, and around 1526 and 1499 are more significant.

Daily chart of the OMXS30 between the 2nd of December 2016 and the 21st of April 2017                              source: Aktiespararna

Should OMXS30 start trading below these price levels during high trading volume, with a turnover of around 20 billion per day, clear sell signals are triggered. On the other hand, if these levels are broken during modest trading volume, we are still considering these as potential buys for the long-term investor.

This applies because the long-term trend, which we define as the angle of the 200-day moving average, is continuing to show positivity. So far, the market has shown a slippery resistance against negative news. The volume pattern is still positive, and OMXS30 has continued to show higher highs and lows the last few months.

Beyond that, other Swedish stock index, aside from OMXS30 that adjust for dividends, has already triggered their buy signals, like to the ones being triggered if OMXS30 should start trading above 1603.

OMXS30 will trigger a strong buy signal, if it were to start trading during high volume above resistance level of 1578, 1585 and around 1591, and especially if above 1603. In this case, we would be turning our heads towards 1630-1670.

If buy signals were to be triggered during relatively low volume, the short-term gain is at a risk with a more modest gain. Maybe a couple of percent before the index will be stuck within another consolidation.

The Stochastic indicator are not showing any clear clues for the moment, the indicator is namely in a neutral area, meaning neither oversold nor overbought.

Hourly chart of the OMXS 30 between the 15th of March 2017 and the 21st of April 2017                               source: Aktiespararna

Looking at the hourly chart above, we can see that OMXS30 continues to trade just below a resistance around 1578. For the short-term trader, consider sell and take profit at this location from previous buys. If taking short positions, which we do not recommend to do, use a close stop loss in case we find ourselves breaking out of resistance around 1578.

In this case, a buy signal will potentially be the start for an even larger and stronger move, compared to the ones being experienced the last few weeks. In this case position, yourself for the market to move higher. Initially look for resistance levels of around 1585, 1591 and around 1603. Use a stop loss if the support level of 1572 are broken, but use a trailing stop if the position is showing bigger profits.

If a trader is positioned in a larger timeframe, we continue to suggest like the last few months to be invested for the market to move higher. If there is more room, consider increasing the position when the market is moving lower, during low trading volume.

We continue to have this view, as long as the long-term trend are strong, and the volume pattern is still positive. Should OMXS30 start moving lower, during significant trading volume start being more careful, and use a stop loss even for the long-term positions for index and stocks.

 

 
Weekly chart of the OMXS 30 between the 5th of Janurary 2012 and the 21st of April 2017                  source: Aktiespararna

 

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This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

 

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12/05/2021 03:17:56