The bears made the most out of last Friday as the EU50.I and other markets were pushed lower with full force down into key support at the 2,900 level. I in late hours it even managed to test the key pivot at 2,890, something that before the end of the week didn't look likely.
The brutal price action we experienced Friday is most likely to have been a wave three decline rather then anything else, part of the cycle that started on May 31.
If the tape is bearish, the current decline should now last for at least 18 or 19 trading days giving us the end of this week as an important inflection point.
From a price perspective for the bearish outlook to hold, a short-term oversold bounce should not be able to establish itself above 2,944, if that were to happen something else is likely going on.
A break below 2,890 following a bounce would be a fairly clear signal of further declines into support pivots at 2,863, 2,836 and 2,808.
Management and risk description
The plan for this week is to sell one half upon stalling price action below the 2,944 pivot and another half upon a break of the 2,890 pivot following an oversold bounce.
The risk to this setup is established price action above 2,944, which would signal a bullish tape.
Entry: Sell on half upon bounce failure into 2,944 and one half upon a break of 2,890 following an oversold bounce
Stop: Established price action above 2,944
Target: 2,863, 2,836 and 2,808
Time horizon: This week
EU50.I daily chart
EU50.I hourly chart
EU50.I daily development chart
Source: All charts, Saxo Bank - create your own charts with SaxoTrader. Click here to learn more
— Edited by Adam Courtenay
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Non-independent investment research disclaimer applies. Read more