Trade view /
06 June 2016 at 5:09 GMT
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.
Entry: sell a bounce towards 3025.
Stop: sustained price action above 3050.
Time horizon: 2 – 5 days.
EU.I daily chart
EU.I daily development chart
Source: all charts Saxo Bank. Create your own charts with SaxoTrader; click here to learn more
— Edited by Gayle Bryant
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