Column: ”OMXS30 on hold before earnings season”

18.04.2017 | 1 min lukea
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Nasdaq OMX continues to hold ground before a breakout. Interesting buy signals are triggered if we start trading above resistance levels around 1585 and around 1591, as well as 1603 during high trading volume.

Last week Nasdaq OMX was affected by the Easter holiday, which caused the market to be quieter, being put on hold before the earnings season as well as the presidential election in France end of this week. Stock index OMXS30 gained +0.2 percent, and ended the week at 1572.81. So far, the index has gained +3.7 percent since the beginning of the year. If we adjust for dividends, the index has gained +6.0 percent.

The single biggest drama amongst OMXS30 stocks last week, was bid rumors in SCA hygiene division which caused the stock to gain 7.8 percent during Thursday. Even Fermenta, pardon me Fingerprint was holding ground. This week however we believe the activity will pick up some pace, when the earnings season starts to kick off. However, the future development remains to be seen.

OMXS30 will trigger strong buy signals if it were to start trading above 1585, around 1591 and above 1603 during relatively high trading volume. Preferably when there is an activity around 20 billion per day in round turn during days when the market trades higher. In this case, we are looking for the next resistance levels of around 1630-1670. Should OMXS30 start trading above the closest resistance levels, during low trading volume the potential further gain is considerably more uncertain.

Daily chart of the OMXS30 between the 30th of November 2016 and the 13th of April 2017                              source: Aktiespararna

Currently OMXS30 continues to consolidate. Important support levels are at 1540, around 1526 and around 1499. If OMXS30 were to find ground below these support level during high trading volume, strong sell signals are triggered. Sell signals during days when the market is trading lower during low trading activity, we consider as potential buys for the long-term investor.

The long-term trend is still showing strength, and volume pattern are still positive. This means that we continue to highlight a higher probability that new buy signals will be triggered, and the market to trade higher rather than lower. Further positivity to this is that other Swedish stock index adjusting for dividends has already started trading higher above significant price levels, as well as triggered buy signals that we are currently waiting for OMXS30 to gain ground above 1603.

Stochastic-indicator continues to be in neutral area since a few weeks back. The stock index is neither overbought nor oversold. Dividend adjusted Swedish stock index are usually overbought, but this in itself is not a stronger buy signal since it can be overbought for a longer time period.

Hourly chart of the OMXS 30 between the 16th of March 2017 and the 13th of April 2017                               source: Aktiespararna

For short-term investors, last week entering a buy may have already sold at resistance around 1585. Currently the market gives us potential buys at around support level of 1564, and sell at resistance level of around 1585. Consider using a stop loss if we start trading below support level of around 1564. In this case OMXS30 has a high probability to test our next significant support level of around 1544.

If we were to find ground and start to trade above resistance level of 1585, we initially look for next short term resistance level of around 1591, before next resistance at around 1603. If we start trading above these resistance levels during high trading volume, consider looking at higher price levels at around 1630-1670. In this case you could use a trailing stop loss, along with the position increasing profit. For example, the stop loss could be placed at the previous day’s low.

For the long-term investor, we continue to recommend being positioned long, and OMXS30 to trade higher. Consider increasing the position if possible, when the market is trading lower during relatively low trading volume.

As long as the volume pattern are positive, and the long-term trend is still showing strength, we suggest this strategy for long-term holdings. If these patterns would start to diverge, consider be more careful, and close any positions.

Weekly chart of the OMXS 30 between the 5th of Janurary 2012 and the 13th of April 2017                  source: Aktiespararna


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