Investment Idea

OMXS30 braces for battle with key support levels

27/11/2017 | 1 min read

On a larger time frame, the OMXS30 finds itself in an upward moving trend. However, in the shorter time frames the index is stuck in a consolidation period between 1600, and 1640.

Last week the NASDAQ OMX had a tendency towards moving to the downside on low volume. The OMX Large Cap index saw itself decrease with 0,2 percent, and closed the week on 1614,62. Gains for the year now total +6.2 percent, -10,2 percent including dividends.

There was a bid for the OMX-listed company Fingerprint; a bid that sent the stock soaring 34 percent. When the company later addressed the rumors, commenting that the likelihood of such a bid to be low, the stock fell back erasing most of its gains for the day.

The US-dollar also declined last week, which might have had an impact on companies dependent on exports. H&M, who are usually resistant to dollar declines, continued its journey south.

Despite the markets behavior of late, the long-term trend for the OMXS30 is still up. The weekly chart below illustrates an upward moving trend, with higher highs, and lower lows.

Weekly chart of the OMXS30                                                source: Infront

The OMXS30 also finds itself above an important support level around 1600. Should the index establish itself below 1600, especially if such a move occurs alongside an increase in volume, this could signal weakness. Combining this with the stochastic indication of weakness to come, gives this more validation. Below this level, support rests at 1500-1518.

In order for the OMXS30 to acquire new long-term signals of strength, it needs to move past the all-time high of 1720. This would also need to occur under an increase in volume in order to have some merit.

On the shorter time-frame the OMXS30 finds itself in a consolidation period between 1637-1640. The index has made some attempts at breaking through these resistance levels, but these attempts have proved unsuccessful.

Daily chart of the OMXS30                              source: Infront

The volume on up-days has been relatively low, which could indicate a mild appetite from the long-term investors.

There is a resistance level at 1656, which has proved to be trying, in attempts for the index to reach higher levels. If price could pierce through this level, it could provide strength in an eventual climb to higher levels. In such a scenario, the next resistance level rests at 1682.

The stochastic indicator in the daily chart illustrates that for the time being, the OMXS30 is technically oversold. This could increase the likelihood of support holding at 1600. The 200-day moving average currently rests at 1605, which gives strength to the notion that this could be a psychologically strong support level.

The hourly chart, below, also shows the OMXS30 in a consolidation period.

Hourly chart of the OMXS30                              source: Infront


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