Short term
Trade view / 06 June 2016 at 5:09 GMT

EU50 heading lower towards support

Instrument: EU50.I
Price target:
Market price:
Background

The EU50.I is like most other larger European equity markets in a bear market, defined by lower highs and lower lows. A picture that is confirmed by a falling 200-day moving average.

On February 11, this market put in a low and started a bullish move higher before peaking on April 21. The move higher appears to have been a three wave counter-trend bounce. From there this index moved lower in five waves, given the structure this index should be able to produce yet another wave of selling before bulls get the chance to propel this market higher again.

Support is found at 2900, a level of importance going forward, which if it holds could be able to launch a new larger bull swing higher and which upon failure to hold its price could fuel further selling. Resistance is found at the 3050 level, which is the top of Friday's daily candle, a candle that from a bearish perspective ideally shouldn't be breached.

Management and risk description

The plan is to sell a bounce towards the 3025 level for a move lower towards support at 2900, the stop could initially be placed upon a sustained break of the 3050 level.

The main risk to this setup is a failure for bears to reach the outlined support area.

Parameters

Entry: sell a bounce towards 3025.

Stop: sustained price action above 3050.

Target: 2900.

Time horizon: 2 – 5 days.

EU.I daily chart
EU.I daily chart
 
EU.I daily development chart
EU50.I daily development chart
Source: all charts Saxo Bank. Create your own charts with SaxoTrader; click here to learn more 

— Edited by Gayle Bryant

For more on equities click here

Non-independent investment research disclaimer applies. Read more
1y
Johan Berntorp Johan Berntorp
With the tendency for this market to push everything to the extreme we poked through 3 050 today for about 10 minutes but the market failed to hold. As long as this level can withstand more bullish challenge there's still a shot for this to work out.
1y
fred seru fred seru
An Elliot triangle or a head and shoulder pattern, it could be a nice Bear if it breaks south-- good luck, i dont trade it just making an observation.
1y
Johan Berntorp Johan Berntorp
The larger pattern you mean?
1y
Johan Berntorp Johan Berntorp
Having this market go to 2 900 by tomorrow is not looking all too realistic. So instead one will have to widen the time frame or as an alternative tighten the target level. Downside pivots are 2 997, 2 971, 2 944. To the upside we have 3 025 and 3 054.
1y
fred seru fred seru
Yes, the larger time frame...Your Daily Chart also looks like a head and shoulder pattern.
This is the weekly pattern structure
1y
Johan Berntorp Johan Berntorp
It should start trending in a larger way soon, either with a continuation on the H&S pattern or a failure of the same. Nice input, thx!
1y
Johan Berntorp Johan Berntorp
Next downside pivots are 2 917 and 2 890.
1y
DudetteUK DudetteUK
It took its time to come, but we are finally there! Thanks!!
1y
Johan Berntorp Johan Berntorp
Yes, nice downside pressure. Breach of 2917 indicates 2890. Did you find some info about how to construct the pivots? In reference to a prior comment you made.
1y
DudetteUK DudetteUK
not yet, to be fair I had been busy so this will be some works for the summer.

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