Strategic trade
Trade view / 24 August 2015 at 4:49 GMT

Fabege double top is bearish for the medium term

Instrument: FABG:xome
Price target:
Market price:
Background

Shares in Swedish real estate owner and manager Fabege (FABG:xome) moved higher along with the broader market from mid-October last year and as with many other stocks on the Swedish exchange, the move was very strong.

The peak came in at the end of April following an exhaustion pattern that finally broke to the downside. From there the stock moved lower into late June when it turned higher into a peak set in mid-August.

The formation present in the larger scheme of things is a double top, a double top pattern which was accompanied by negative oscillator divergence on the daily chart during the latest topping sequence. Looking at the monthly chart we can see how the Relative strength Index (RSI) and the Slow stochastic indicator (STOC-S) have turned lower and the long tailed candles as of late that implies selling pressure from the highs.

Fabege now has support at the SEK 112 which is a level that this stock should be able to reach within context of the current bearish cycle lower. If this level were to fail the next level of support is found at the SEK 99 level.

Management and risk description

The plan is to sell this stock below SEK 130 with a stop at SEK 132 and targets of SEK 112 and SEK 99. Once the first target is reached take partial profits and once the first target is reached, start lowering the stop and trade towards the second target with the remaining position.

The risk to this setup is a bounce or renewed bullish energy that pushes this stock through our stop level.

Markets are obviously super volatile, make sure there's a decent risk/reward before entry and size trade accordingly.

Parameters

Entry: Sell below SEK 130

Stop: SEK 132

Target: SEK 112 and SEK 99

Time horizon: 4-12 weeks

FABG:xome daily chart
FABG:xome daily chart
 
FABG:xome monthly development chart
FABG:xome monthly chart
 Source: all charts Saxo Bank

— Edited by Adam Courtenay

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Non-independent investment research disclaimer applies. Read more
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ListerChaves ListerChaves
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