Strategic trade
Trade view / 26 September 2016 at 5:32 GMT

Hennes & Mauritz long-term opportunity setting up


The stock of Hennes & Mauritz (HMb:xome) has been one of the weaker issues in the OMXS30.I since the peak back in spring/early summer last year. From the price peak in 2015 the stock has managed to lose about 36%. The high was set at SEK 369 and the low, which came in just above SEK 235, is quite close to a 360-degree alignment indicating a complete cycle lower.

From a time cycle perspective we are trying to find cycles that align with the time from the high all the way back to 2010, with the peak set on April 15 in 2015. Such an alignment was in place with the low on June 23 this past summer, when the decline from the aforementioned peak had lasted for 434 days, marking a 360-degree alignment. Also, if we add that number of days, 434, with the number of days from the 2010 peak into the 2015 high, we end up getting 2,102 days, which happens to align to 180 degrees. We have reason to suspect that the low set on June 23 is important!

From a wave perspective we are now looking for confirmation that the move higher from the June 23 lows into the August 15 highs truly has been a first-wave advance. Such an indication would come upon a daily close above SEK 263.

Looking at the technicals we have suppressed oscillators on a daily time frame, but more important is that we have the monthly slow stochastic indicator (STOC-S) at an oversold reading. If we look closely we can also see that it is building a bullish divergence.

If this situation turns out to be a larger low, the next bull swing should, from a time cycle perspective, last at least the number of days as the preceding decline. At the current state we would then be looking at an advance that should be able to sustain for more than 434 calendar days. From a price perspective, in such a case we could assume we are in for a re-test of the April 15 highs from 2015 at around SEK 360.

Hennes & Mauritz report earnings later this week.

Management and risk description

There are obviously numerous ways to approach this stock. The plan in this trade view is to buy HMb:xome upon a daily close above SEK 263 for a move towards new all-time highs. The stop could initially be placed at SEK 247 and our initial target is set at SEK 360.

The risk to this trade view is a continued weak market, which we are trying to handle by having a buy trigger in place so we don't get caught in a market that just keeps on falling.


Entry: Buy a daily close above SEK 263.

Stop: SEK 247.

Target: SEK 360.

Time horizon: About a year.

HMb:xome monthly chart
HMb:xome monthly chart
HMb:xome daily chart
HMb:xome daly chart

HMb:xome daily development chart
HMb:xome daily development chart
Source: Saxo Trader.  Create your own charts with SaxoTrader; click here to learn more

— Edited by Susan McDonald

Non-independent investment research disclaimer applies. Read more
26 September
Aleksa06 Aleksa06
I like Your Idea.
26 September
Johan Berntorp Johan Berntorp
Thanks! I think it could be rewarding to watch it closely going forward.
26 September
Aleksa06 Aleksa06
I'm following


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