The stock of Swedish multinational clothing company Hennes & Mauritz (HMb:xome) has been a real weight on the Swedish stock market of late and may continue to be so. Short term, however, this stock is looking stretched and appears due for a bounce.
Technically H&M has once again touched the downward tilted trendline that has been containing most of the price action since the peak set in March last year.
At the same time, we are starting to see a positive divergence build on the daily oscillators and even more so on the weekly relative strength indicator (RSI).
This stock has longer-term support at the SEK 340 area, but the downward sloping trendline that got hit yesterday should also manage to support this stock along with the now closed gap from September 2013 which are both located at the SEK 250 area.
Management and risk description
The plan is to buy H&M above SEK 250 for a bounce towards SEK 265 and SEK 275 in the coming weeks. The stop could initially be placed upon a daily close below SEK 250.
The risk to this setup is broader stock market weakness.
Entry: Buy at market above SEK 250
Stop: Daily close below SEK 250
Target: SEK 265 and SEK 275
Time horizon: One to three weeks
HMb daily chart
HMb weekly chart
Source: Both 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