Investment Idea

OMXS30 showing signs of weakness in an long-term upwards moving trend

14/11/2017 | 1 min read

Last week the OMXS30 index stared to show some signs of weakness on the shorter period time frames. More confirmation of weakness can be claimed if the index should break through support levels at 1634.

The NASDAQ OMXS30 took a down turn last week on light volume, coming off a technically overbought period of trade. The Swedish large cap index fell 2,6% and closed the week at 1643,68. The returns for the year were thereby reduced to 7,7 %, 11,4% including dividends returns.

The NASDAQ OMXS30 followed suit as investors took profits through most of Europe’s leading indices; fueled by rumors that president Donald Trump’s tax reform plans had to be adjusted, or pushed forward into the new year. Last week’s analysis highlighted the importance of these tax reforms with regards to a sustained positive market climate.

This was confirmed last week when republicans in the senate presented a tax reform that varied form the proposed tax reform laid out by republicans in the house of representatives. Among the discrepancies were that the corporate tax reform be pushed into 2019. Despite this, Europe saw larger declines than US indices last week.

Among the companies that experienced larger declines last week were cyclical stocks, such as Getinge, following the presentation of future goals set forth by the company. Ericsson also made investors disappointed after not living up to the markets expectations during a meet-and-greet company fair.

The declines have however not affected the long-term picture for the OMXS30. In the weekly chart below, a long-term trend can still be observed, while the index retains its confirming trend pattern of higher highs, and lower lows above its rising 40-week moving average.

Weekly chart of the OMXS30                                                source: Infront

Despite last week decline occurring with relatively low volume, the relation between price and volume of the weekly chart does show some signs of weakness. On the lower time-frames, this relationship does not show the same type of weakness.

As long as the OMXS30 holds its ground above 1600, the long-term charts formation is intact.

In the daily chart the OMXS30 showed signs of weakness when the rising trend line broke around 1665, and later when price broke through support at 1656.

Daily chart of the OMXS30                              source: Infront

As mentioned above, last week’s decline occurred with relatively low volume and the OMXS30 finds itself at an interesting juncture around the support of 1634. If also this support should fail, the support around1600 should be watched closely where the elusive 200-day moving also rests. Support below this price rests at 1518.

Should the OMXS30 bounce from support 1634, resistance levels can be found at 1656, 1670, but most importantly at the year’s high of 1680. Should the index succeed to establish itself above this level, new strength can be confirmed.

New weakness on the daily chart can also be confirmed if price break through the support around 1634. But a short-term positive signal could be given if price can establish itself above 1643. The next important resistance level can be found around 1665-1666.

The hourly chart below illustrates potential indications of moves to lower levels.

Hourly chart of the OMXS30                              source: Infront



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