- USDSEK cautiously bullish short term
- OMXS30.I - 2011 all over again?
- Hennes and Mauritz (HMb:xome) and Kinnevik (KINV_B:xome) on a knifes edge
By Johan Berntorp
As the outlook for Swedish equities has gone from better to worse as of late it could be interesting to share some thoughts concerning the last real market spook of larger proportions.
A spook which in many ways looks like 2011, both concerning the price action as well as the degree of the current cycle that we are possibly up against.
USDSEK and EURSEK both weakened yesterday which was a bit of a surprise. My stance is that the SEK usually weakens during market turmoil. What can the USDSEK charts tell us?
And last but not least I will have a look at two individual equity names with downside targets upon breakdown.
Where will Sweden be heading? Photo: iStock
USDSEK cautiously expecting further strength
The dollar has within what appears to be a larger consolidation pattern embarked on an anticipated bounce from the 8.00 area, a bounce which could have ended with the strong reversal yesterday.
To see this pair weaken as market turmoil reigned was definitely a surprise. However, zooming in on the chart we can spot five waves higher from the low set on June 18, which means there's a possibility a first cycle higher ended yesterday.
Even though we have a big nice bearish engulfing candle on the daily bar-chart, the expectations are for at least on more swing higher taking this pair for a trip towards, to or above the 8.50 level which is the next resistance zone.
So a cautious bullish stance in the short term. For bears to really take control in the longer term they need to break the 8.00 level and also take out the possible wedge pattern that appears to be emerging in this pair.
One clue of that taking place would be a break below the bullish trend line on the Relative strength indicator (RSI) which was highlighted last week.
USDSEK daily chart
OMXS30.I and the 2011 look alike
I am not the only one drawing parallels to the price action that took place back in 2011 but what is interesting about the OMXS30.I is that today's pattern has a very similar look to that of the past! And even though the past doesn't have to repeat itself, this situation sure would make me think twice about buying the dip right here right now.
Will history repeat itself? The old Swedish Stock Exchane now houses the Nobel Prize Museum. Photo: iStock
Take a look at the charts below. The first chart is of 2011 and the last chart is today's market. The evolving pattern saw a peak, a low and a sluggish grind higher into a second peak. From the second peak there was a test of support a spike higher and then in 2011 we had a break through support.
In today's market we haven't seen the break yet and the future will tell if it happens or not but we could experience a deja vú moment here.
From a cycle perspective one option outlined last week is that we are in a larger fourth wave to reset the sentiment of the bull-run off the 2011 lows. This would mean we are in the same degree of cycle as back then.
What is of interest though is that the patterns compared appear to have been larger back then, meaning that the swings in the past were larger than those of today. In turn the conclusion from this would be that the immediate future is less bearish now then it was back then, both in time and in price.
The crash four years ago wasn't exactly a walk in the park. Photo: iStock.
It would however possibly be bearish enough as the 2011 crash most certainly wasn't a walk in the park!
What would bulls have to do to turn the tables? A break of the 1,630 would be very welcome from that perspective.
OMXS30.I daily chart of 2011
Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more
OMXS30.I daily chart today's market
If the OMXS30.I is set for a 2011 deja vú moment, individual stocks obviously have to follow. Most likely more or less all of them, meaning there would be little chance manage to pick the ones actually going higher.
H&M is everywhere and therefore one of Sweden's heavz weights. Photo: iStock
Hennes and Mauritz
As one of the absolute heavy weights in the OMXS30.I the developments of H&M is important. As of the close Monday this stock closed right at support at the SEK320 level printing an inverted hammer candle which is a bullish embryo.
However, being the third time at support a break shouldn't be ruled out. Upon established price action below SEK320 support at SEK310 and SEK300 would be next areas from where bulls could put up a fight.
Also note that daily oscillators are moving lower as well as the 50 day moving average indicating that the short to medium trend is down. And even though not shown here this is also true for the weekly oscillators.
In this case bulls would for starters need to reclaim the 200 day and 50 day moving average and then break above the downward sloping trend line.
HMb:xome daily chart
Investment firm Kinnevik (KINV_B:xome) is in a dangerous position as we can identify a head and shoulders topping pattern, which should appear frequently in a suspiciously toppish broader market.
The left shoulder peaked in February, the head in April and the right shoulder peaked along with the broader market end of May. A break of the SEK260 level would trigger the bearish pattern with a target of about SEK230. Bulls would need to reverse the situation and take out the SEK277 level to bring back confidence.
In this stock both the 50 day and the 200 day moving averages are pointing lower, even though the latter ever so slightly. This confirms the appearance of a three wave structure off the October highs into the April high. A larger five wave swing lower coming up?
KINV_B:xome daily chart
— Edited by Clemens Bomsdorf
Johan Berntorp is a Sweden-based technical analyst and trader