The fall out from the Brexit vote was massive hitting core EU markets in epic proportions. The question at large is if this was a shock event or if it's part of events unfolding within the current negative trend - with the first being more positive for markets than the latter.
Following the negative open Friday markets managed to rebound and the EU50.I climbed from 2,650 to 2,835 before pulling back and closing the trading of the day at around 2,757.
Looking at the hourly chart we can see that the bounce came in a three wave motion and that the following pull-back of that bounce stalled at the 2,732 pivot closing the day with a bullish hourly candle.
If today see prices establish itself below the 2,732 pivot price confirm the three wave bounce structure and odds are we are heading lower towards the Friday panic lows. Before those lows we have support at 2,704 and 2,679. If the lows were to break we have support at 2,627, 2,601 and 2,576.
The bullish angle to this tape is if price made a low late Friday and manages to establish itself above 2,836, if so there appears to be a shot at a gap close at 2,916. There is however quite a distance to the bullish pivot.
Management and risk description
The plan for the week will be to look in the direction of the larger trend which is pointing lower.
The current bounce is likely to stall and perhaps it has already, such signals would be given upon established price action below 2,732 from where this market is likely heading lower towards the 2,704, 2,679 and 2,653 support.
The risks to trading in the current environment is quite obvious, extreme volatility, possible central bank intervention and positive/negative news flow in the aftermath of the referendum. Trade small!
Entry: Sell below 2,732.
Target: 2,704, 2,679 and 2,653.
Time horizon: One to five days.
EU50.I daily chart
EU50.I hourly chart
EU50.I daily development chart
— Edited by Adam Courtenay
Non-independent investment research disclaimer applies. Read more