Medium term
Trade view / 22 August 2016 at 5:11 GMT

Either way, Ericsson is staging a break

Instrument: ERICb:xome
Price target:
Market price:

The stock of Swedish Telecom company Ericsson (ERICb:xome) is relatively weak as it is buried within a strong down trend that has, in large, been in place since the peak in late March 2006.

The latest swing lower commenced off the April highs last year, and for a conclusion to this downtrend we are from a time cycle perspective looking for an end to this cycle with a relation to the peak set back in April last year.

Such a relation could have occurred on May 20, but price has managed to deny this as a valid low. The next possibility is August 12, and maybe there might be something going on here.

From a price perspective the indications are for this downleg to be able to reach into the high end of the SEK 40-SEK 50 range in due time.

Looking at the chart of Ericsson we can see how the market through August has been moving in a tight range, we will soon breakout of this range.

A break lower would negate the possibility of the time around August 12 low as an important one and would open up for a decline into the next time cycle window around November 11 - with a price target possibly as low as SEK 49. A break higher would set up for at least a short term burst into SEK 65 and SEK 69.

When we see the Ericsson's chart it is easy to be bearish, but often the market like to make a head fake before the real move. 

Management and risk description

Ericsson looks like a coiled spring ready to move. The bullish plan is to buy a break above SEK 63 with a stop at SEK 61 for a move higher into resistance at SEK 65 and SEK 69.

Once price has established itself above SEK 65 the stop can be moved higher. Either to entry (around SEK 63) or a stop upon a daily close below SEK 65.

The bearish plan is to sell a daily close below SEK 60 with a stop at SEK 63 and a target of SEK 57, SEK 53 and SEK 49. Once the SEK 57 level has been taken out one can start to move the stop lower.

Parameters (bullish)

Entry: Buy a break above SEK 63

Stop: SEK 61

Target: SEK 69

Time horizon: One to four weeks

Parameters (bearish)

Entry: Sell a daily close below SEK 60

Stop: SEK 63

Target: SEK 57, SEK 53 and SEK 49

Time horizon: One to seven weeks depending on target

ERICb:xome daily chart
ERICb:xome daily chart

ERICb:xome daily development chart
EIRCb:xome daily development chart
Source: Both charts, Saxo Trader - create your own charts with SaxoTrader. Click here to learn more 

— Edited by Adam Courtenay

For more on equities click here         

Non-independent investment research disclaimer applies. Read more
Johan Berntorp Johan Berntorp
Ericsson is on the verge of a break lower. The mid-August low has been taken out on a daily closing basis paving the way for the next cycle alignment in November...
Johan Berntorp Johan Berntorp
This is now on sell, however if price come back and take out SEK 63 the tape would look quite similar to the turn of the Goldminers in January. It isn't a likely scenario and Ericsson is most likely heading lower but keeping it in the back of my head if a reversal is seen...


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail