Column: OMXS30 Analysis week 12

Column: OMXS30 Analysis week 12

den 24 mars 2017 författare Tradingportalen

OMXS30 continues to trade higher, slowly but steady. The stock index is consolidating from a short-term view. Buy signals are triggered if OMXS30 starts trading above resistance level of 1603, during relatively high volume. Sell signals are triggered if the stock index starts trading below support level of 1560. The long-term trend and positive volume pattern indicates a higher probability that the index is about to break out.

Last week Nasdaq OMX traded slightly higher, with an increasing volume. Despite this, last week OMXS30 dropped -0.2 percent, and ended the week at 1584.97. Since the beginning of the year, the stock index has gained +4.5 percent. Considering dividends, OMXS30 has gained +5.2 percent.

The stock index dropped mainly because Nordea was trading excluding dividend, which pushed the index lower with about 10 points, roughly -0.6 percent. The upcoming two months’ stock dividends included within OMXS30, will push the index lower with about 38 points, roughly -2.4 percent. OMXS30 is a price index, and does not exclude dividends.

Stock index like the OMXSPI take dividends into consideration, by adding the dividend when the index calculation is done. A dividend should also theoretically have a neutral effect on the valuation of a stock. The stock should drop as much as the dividend is, since the dividend is only moved from one account to another of the stock holder. Practically the stock usually does not drop as much as the dividend, mainly due to the annual general meeting, held the day before the stock is trading excluding the dividend, where the company and the board usually can present its positive view of the company’s future.

source: Aktiespararna

However, price index like OMXS30 does not compensate for dividend in the underlying stocks. This means that if the stock market wish to value stocks at the same price level end of May as today, OMXS30 would drop 38 points, roughly -2.4 percent until then. If the stock index would continue to trade at 1585, practically this means that the stock market has raised the value of the including stocks by +2.4 percent.

During dividend season, this obviously complicates the scenario a little for the technical analyst. By experience this is only a short-term effect. The first few days after the stock index has dropped due to dividends, sell signals would be triggered, however these signals are not as significant as normally. If a support level would be broken a few days up to a few weeks later, then this is of a more significant character.

Last week there was a lot of focus on the election in The Netherlands, U.S central bank and its rate decision by Federal Reserve, as well as the meeting between U.S president Donald Trump and Angela Merkel, Chancellor of Germany. The outcome was quiet on the market, without any significant effect. The populist party in Netherlands did not win, Fed raised the interest rate by 25 points, and the meeting between Trump and Merkel was considering the circumstances relatively quiet.

 

 source: Aktiespararna

OMXS30 continues to gain momentum, and to consolidate. Support level exist at around 1560, and resistance level at around 1603. The stock index continues to trade higher in a long-term view. The 200-day moving average is showing positive signs, new highs and higher lows causes the index to trade higher, reaching new yearly highs. Even though it feels like OMXS30 is trading at the same spot, the index is trading higher, slowly yet steady. This is shown by looking at the higher resistance within the consolidation area, it is moved slightly higher and higher. Currently it is located at 1603, last week it was on 1595.

Should OMXS30 start trading above 1603 during relatively high volume, preferably around 20 billion per day when the market is trading higher, new buy signals are triggered. In this case, we are aiming for resistance levels of around 1630-1670. If the market starts trading above these levels, we are looking at all-time high of 1720. If OMXS30 would start trading above 1603, during slightly lower volume, then the market movement does not need to be very significant. In this case the stock index would more likely only gain a few percent, before another consolidation would take place.

Looking at the hourly chart below, we can see that OMXS30 receives short-term sell signals already at 1576, and if 1568 is broken. In a slightly longer view support level of 1560 and around 1540, 1526 and specifically 1499 are more significant.We are still considering potential buys, for the long-term investor if the index receives sell signals when the market trades lower under relatively low trading activity. OMXS30 is neither overbought, nor oversold looking in our Stochastic-indicator, and is trading somewhere in between.

 

source: Aktiespararna

The long-term volume pattern is still positive. This increases the probability that OMXS30 will continue to rise, along with the long-term positive view. For the short-term investor, we are still recommending to trade along with the market moving higher, as long as the market does not start to trade below support level of 1560. Currently there is a high probability for a re-test of support level of around 1603. Should the stock index start trading below support level of 1576, short-term investor can act accordingly. In this case, we are looking at a test of support level of 1568, as well as 1560. Consider using a stop loss relatively close, just above 1576 and 1568.

For the long-term investor, we are still focused on increasing the portfolio when the market is trading lower, as long as we are looking at lower trading activity. This applies as long as the long-term view is indicating the market to trading higher, as well as the volume pattern is still positive. If these patterns would diverge, consider decreasing risk exposure significantly.

 

 

Legal notice

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.

 

The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

2022-12-05 06:21:32