Column: OMXS30 week 10
”OMXS30 continues to trade within a positive trend…?”
OMXS30 continues to trade within a long-term positive trend. Short-term the stock index consolidates between support level of 1560 and resistance level of 1594. If the stock index starts trading above 1594, new buy signals are triggered, especially if this happens during high trading volume. In this case we are looking at the market to trade higher towards 1630-1670. On the contrary if the stock index OMXS30 starts trading below support level of 1560, new sell signals are triggered, in which support levels at 1540, around 1526 and 1499 are particularly interesting.
Last week Nasdaq OMX traded slightly higher during low trading volume. Swedish stock index OMXS30 gained 0.7 percent, and ended the week at 1581.32. Since the beginning of the year, the stock index has gained 4.2 percent. The week was obviously affected by the holidays, when the schools were closed, and anticipation of U.S president Donald Trump speech in front of the congress during middle of the week. After the speech, the market traded higher, maybe not as much because of what was delivered, but rather that the uncertainty was cleared.
We are still seeing underlying buying momentum for stocks, where a lot of cash flow is coming from bond sales. The market continues to take smaller breaks, in obvious anticipation before speeches and elections, before resuming its momentum. Overall we are leaving a positive earning season behind us, and we are seeing the market shift from micro to macro. So far most of the indicators are pointing at an improved world economy.
The long-term trend is also still showing positive signs, and OMXS30 is showing a clear pattern of higher highs, and higher lows, as well as the long-term pattern of the trading volume is positive. The stock index continues to trade well above its long-term 200 day moving average, which is showing positive signs of future gains. The short-term trend for OMXS30, in which we define as the 20 day moving average, is also showing positive signs of future gains.
To be able to trigger new buy signals, the stock index needs to start trading above the yearly high, and resistance level of 1594. If the stock index starts trading above this price level during low trading volume, there is a high risk of a short-term consolidation phase, similar to the one we are currently experiencing within 1560 – 1594. For a possible breakout above 1594 during high trading volume, around 20 billion per day, we are looking at the market to trade higher.
Around the psychologically important price level of 1600, we might experience a bit increased volatility, but after that we should experience the stock index to trade higher towards 1630 – 1670. After that we will start looking at previously all time high 1720.
Should the stock index OMXS30 starts trading below support level of 1560, new sell signals are triggered. In this case the stock index has a high probability to move towards support level of 1540, or even the one at 1526. The sell signals are not specifically significant in a more long-term view, as long as it does not happen during high trading volume, or if the market starts to trade below 1499. When the market trades lower, and the trading volume is lower than normal, we consider these days as buying potential for the long-term investor.
The stochastic indicator is showing us that OMXS30 is no longer overbought, which makes it easier for the stock index to trade higher for a future breakout of 1594.
The short-term investor, we recommend to positioning themselves for the market to continue to trade higher, as long as the market does not start trading below support level of 1560-1561. The very short-term investor can act on the short-term sell signal, if support level of 1574 is broken, and use a stop loss if the stock index starts trading above 1574 again.1564. Currently we see a good chance for the market to trigger new buy signals, when the market starts trading above resistance level of 1586, towards 1594. Stop loss is then recommended below support level around 1586.
Should the stock index start to trade above resistance level of 1594, new buy signals are triggered. Initially we are looking at the market to trade higher towards 1600. If this happens during high trading volume, we are looking at even higher price levels around 1630 – 1670. Stop loss is then recommended below the previous day low. For the long-term investor, we are still looking at the market to trade higher, and positioning themselves accordingly. Preferably positions could be increased during the days when the market trades lower during low trading volume.
The long-term trends are still positive, and the volume pattern is positive. If these indications would change, act accordingly and be more careful.
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