Column: OMXS30 Analysis week 15

11.04.2017 | 1 min lukea
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OMXS30 continues to consolidate, partly because of an awaiting momentum due to the upcoming quarterly reports, and the election in France.

Last week Nasdaq OMX traded slightly lower, during relatively low trading activity. OMXS30 fell -1.1 percent, and closed the week at 1569.67. The index has gained 3.5 percent since the beginning of the year. Adjusted for dividends, the last week only fell -0.7 percent, and since the beginning of the year the index would have gained 5.7 percent.

Last week OMXS30 lost some ground due to dividends in SCA, Skanska, Telia and Volvo with about 6.7 points. Overall the market is drifting a little bit, before the upcoming quarterly reports, that kicks off in the second half of April.

Focus will then be if the profits can beat the market participants increasing profit estimates. The French election, first round in 23 of April, the other one on 7th of May creates some uncertainty.

Overall the market continues to quickly shake off any negative effects. The treacherous and deeply sad terrorist attack in the city center of Stockholm on Friday affected everyone on a personal level. But it did not trigger any chaos in the market.

Not even the very same morning when the U.S sent off bombs to an airfield in Syria, where Russian military could have been located at, the same time when U.S president Donald Trump had a meeting with Chinese president XI Jinping caused any market movement.

We continue to believe that the gaining optimism and the increasing inflation expectations on an international level is caused partly due to the amount of capital being moved from the bond market to the stocks. This explains the resilience when the market to shake off any negative effect from the outside world.

The long-term trend for OMXS30 continues to be positive, and the index is trading well above its 200 day moving average. OMXS30 is also showing from a global perspective higher highs and lows, and positive volume pattern.

Daily chart of the OMXS30 between the 18th of November 2016 and the 31st of March 2017                              source: Aktiespararna

From a short-term view , OMXS30 is stuck consolidating, and the momentum is being pushed back due to dividends. A Swedish stock index adjusted for dividends is generally gaining more momentum than OMXS30.

Despite this OMXS30 shows a few signs of strength. One sign of this is that the stock index frequently closes at its daily highs. There is simply not enough strength from the sellers to keep strong until the end of the trading day. This is clear in a candlestick chart, with long tails on the downside. This is positive signs, signaling the market will continue to move higher.

Significant support levels to keep focus on is around 1540. In case when OMXS30 would start trading below 1540 during high trading volume, an important sell signal will be triggered. In this case look for the next support levels of around 1526 and 1499, which would further add on to the fire. Sell signals during days when the market trades lower during relatively low trading volume, is primarily considered as potential buying opportunities for the long-term investor.

We continue to believe that the most probable scenario is that OMXS30 will continue to trade higher, and sooner or later will establish ground above 1603. An interesting buy signal will be triggered when resistance 1591 is broken.

Should the market start to trade above these price levels during high trading volume, strong buy signals will be triggered for OMXS30. In this case we look for the upcoming resistance areas around 1630-1670. If we would experience considerably low trading volume during the breakout, we do not however expect the market to move significantly.

OMXS30 is neither oversold nor overbought, and Stochastic indicator is in neutral position.

Hourly chart of the OMXS 30 between the 13th of March 2017 and the 31st of March 2017                               source: Aktiespararna

Looking at the hourly chart above, we can see that OMXS30 from an intraday perspective triggered a buy signal when resistance of 1564 were broken. Dared to be positioned over the weekend, this means that for short term traders, now is the time to already be positioned for the market to trade higher. In this case use a stop loss if the index starts trading below 1564. Upcoming support levels would in this case be located at 1554, and around 1551.
Should OMXS30 find ground above resistance of around 1570, a new buy signal would be triggered. In this case we are looking for the market to trade towards 1585, 1591 and around 1603. Consider moving the stop loss slightly below the closest support level.
For the long-term investor, we still continue to recommend to be positioned for the market to move higher. During days when the market trades lower, during low trading volume consider increasing the positions.

This recommendation is valid as long as the long-term view is showing signs of positivity, and that the trading volume pattern is positive. Should OMXS30 starts moving lower during high trading volume, start being more careful. 

Weekly chart of the OMXS 30 between the 5th of Janurary 2012 and the 31st of March 2017                  source: Aktiespararna


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