OMXS30 – Still indicating potential short-term strength, despite sensitive location…

OMXS30 – Still indicating potential short-term strength, despite sensitive location…

den 18 september 2017 författare Tradingportalen

Last week OMXS30 triggered potential further strength when it broke resistance around 1560. Despite the breakout, we are in a sticky situation. The stock index is now technically overbought, and might trigger weakness if technical support at around 1576 does not hold up. Lower support levels are now awaiting at around 1560, 1536, and around 1518. Volume pattern is still negative, and the long-term trend is showing signs of potential weakness. Resistance is closely waiting at around 1591, and around 1600. If these break, we might be looking at further fuel from buyers.

Last week Nasdaq OMX climbed higher, during slightly increased market activity. Swedish stock index OMXS30 gained +1.7 percent, and closed the week at 1578.37. Since the beginning of the year, the index has gained +4.1 percent, and +7.4 percent adjusting for dividends.

Risk appetite amongst investors increased slightly due to lack of negative news. Market is adapting more and more to worries around the world, such as the current problems surrounding North Korea.

A potential trade war between U.S and countries doing business with North Korea, such as China and Russia is getting less realistic, due to resolution in the security council. Hurricane Irma caused less than expected damages, and the U.S debt ceiling was raised, which is pushing problems further away.

At the end of the week, official statements from Bank of England, caused the market to moved lower, due to its tightening of its monetary policy.

Amongst the stocks listed within OMXS30, index heavyweight H&M moved +7.4 percent higher. A bullish analysis highlighted less concerns about sales, and that lower costs could raise the company’s gross margin. On top of this, H&M ended the week with a strong sales report for the third quarter.

Based on a technical analysis perspective, the long-term trend is still showing potential weakness. Already during summer, OMXS30 indicated potential weakness, when it broke support at 1600, which at the time were a strong technical support level. Since then, the index has showed a clear pattern of lower highs and lows.

On top of this, OMXS30 triggered a so-called death cross, when the 50-day moving average crossed 200-day moving average. Though this sounds more dramatic than it is.

We consider this more of a guideline of potential weakness up ahead, and that potential short-term strength might be short-lived.

Last week OMXS30 showed short-term strength, when it broke resistance at around 1554, 1560, and around 1583. Trading activity increased slightly during the week. The short-term trend, which is defined as the angle of 20-day moving average, is still showing potential strength up ahead.

Unfortunately, the market turnover was most significant, when OMXS30 closed lower during Friday. This strengthened even further, the already negative volume pattern since a few months back.

Technically the index is overbought according to the Stochastic-indicator. Which could be indicating potential weakness up ahead. All in all, there are some hesitations that the index could be moving higher.

Daily chart of the OMXS30 between the 6th of March 2017 and the 15th of September 2017                         source: Aktiespararna

During Friday OMXS30 traded as high as 1591.32, the highest price level during the week, but closed at 1578.87, near daily low at 1577.29. This was also the previous day low.

OMXS30has in technical terms, triggered a reversal signal, for potential weakness up ahead. This might be confirmed, in case the index would close below 1577.29. So far short-term support is holding up at 1576, where 200-day moving average is closely located.

Lower support is also awaiting at around 1560. If the index breaks this support, during relatively significant market activity, we could be looking at an even lower move up ahead. At least the risk increases, that we might have triggered a start of a more significant lower move up ahead.

Despite any season patterns, we are keeping a close eye on technical key levels. In case the index moves higher during increasing market activity, if it finds ground above 1591, but specifically 1600, we could be looking at an even higher run. If the index on the other hand breaks support at 1576, we might be looking at an even lower move, with an initial test of support at around 1560.

Potential strength or weakness, during increasing market activity will be considered more reliable. In such a scenario, the market move could be more significant than previously expected.

In the hourly chart below, the index is currently more or less consolidating. Potential short-term strength could be in the ball park, in case we break resistance around 1591. Short-term weakness might on the other hand be up ahead, if we break support around 1576, 1560, 1536, and around 1518.

Hourly chart of the OMXS30 between the 28th of August 2017 and the 15th of September 2017                              source: Aktiespararna

Based on a more long-term view, we are keeping a closer eye on resistance around 1576, 1591. Technical support levels, that are considered to be equally important to keep an eye on, is located around 1576, and 1560.

As long as potential weakness or strength do not come to light, during increasing market activity, we might be looking at a continued consolidation up ahead.

Weekly chart of the OMXS30 between the 15th of September 2012 and the 15th of September 2017                             source: Aktiespararna

 

 

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2023-02-06 01:18:21