OMXS30 – ready for a retracement?
OMXS30 is currently gathering strength before a move. Short-term higher move ahead?
Last week Nasdaq OMX did not experience any significant move. OMXS30 closed the week at 1552.32, after a smaller loss of -0.4 percent. So far, the index has gained +2.3 percent, +5.6 adjusting for dividends.
The week started off with a bit of rumble due to North Korea, and despite a slight concern due to a hydrogen bomb test, the market shook it off quite fast.
Rate decision from both Swedish Riksbank and ECB caused no drama, when long term rates were left unchanged, as well as no significant news regarding QE.
The U.S dollar continues to hold the market in its pocket, and continues to trade around significant support at 7.89. The dollar closed the week at 7.93, but was traded as low as 7.8868. If the U.S dollar would find ground below this technical support level, we might be looking at further added weakness in the market.
Amongst the stocks listed in OMXS30, Nordea decided to move the headquarters to Finland, which initially gave positive fuel to the market, but shortly thereafter weakness, due to worries of potential future stock sales, and less market participants.
AstraZeneca gained +5.0 percent, due to positive news and positive recommendations.
OMXS30 continues to consolidate, and builds momentum before a breakout. If OMXS30 would close above resistance around 1560, we consider this as potential positive fuel comming up. As well as, if OMXS30 close below support levels around 1536, and around 1518 further weakness might be up ahead.
Stochastic-indicator is beginning to reach considerably high and overbought levels. This is not a confirmation of weakness on itself, but it is an indication that short-term investors might look for profit taking, if the market situation turns sour. In such a case, breaking resistance around 1560, might be extra hard.
In case OMXS30 finds ground above 1560 during relatively high turnover, preferably at least 22-25 billion, we could potentially be looking at higher move up ahead. Especially interesting would be, if the stock index breaks resistance around 1583, and around 1600 during such a high market turnover. The long-term view could improve in such a case.
Daily chart of the OMXS30 between the 27th of February 2017 and the 8th of September 2017 source: Aktiespararna
For the last couple of months, reoccurring weakness during increasing market activity has been shown based on technical analysis. Specifically, when support broke around 1600 in July. The long-term trend is also showing signs of potential weakness up ahead.
OMXS30 is showing a clear pattern of lower highs, and lows, and is trading well below the 200-day moving average. The moving average is still showing strength, but as long as the index continues to trade below, it is just a matter of time before this moving average could show weakness.
Another long-term indication, that the trend potentially starts to weaken, is that 50-day moving average the past week crossed the 200-day moving average. A so called “death cross” in technical analysis.
It does sound dramatic, and is much appreciated expression in media. We consider this more of a potential warning that the trend is about to change, based on a short-term view.
In case OMXS30 would start moving lower, and break support at around 1536, and around 1518 we might be looking at further weakness. Next support area is awaiting around 1500.
Another thing to consider,is that potential strength or weakness during relatively low market activity, is not that reliable. In case OMXS30 break resistance and start moving above 1560, 1583 during low market activity, turnover of around 15-20 billion per days, the gain might be limited and a potential test of resistance around 1600 might be short-sided, before yet another lower move.
In our hourly chart below, OMXS30 could be looking at further strength in case it breaks resistance at around 1554. Short-term weakness might come to light, in case support breaks at around 1545.
Hourly chart of the OMXS30 between the 21th of August 2017 and the 8th of September 2017 source: Aktiespararna
Based on a more short-term view, support at 1545 and resistance at 1554 is considered a trading interval, which also means we are keeping our eye open for any potential breakout.
OMXS30 might be looking at further strength, in case resistance breaks at around 1554, and around 1560. In such a case, we could potentially be looking at a higher move towards 1580-1583.
In case OMXS30 shows weakness, we might see an even lower move if technical support at around 1545, and around 1536 breaks. In such a scenario, we keep a close eye on support at around 1518-1520.
Based on a long-term view, we are a bit more risk-aware. OMXS30 has shown reoccurring weakness, and volume pattern continues to be negative all based on technical analysis.
Weekly chart of the OMXS30 between the 7th of September 2012 and the 8th of September 2017 source: Aktiespararna
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