Medium term
Trade view / 06 November 2015 at 6:23 GMT

Investor AB hits solid resistance, pullback likely

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

The Swedish investment firm Investor AB (INVEb:xome) is currently in a very interesting position. Following the low reached on September 29, this stock has now moved in a clear three wave structure higher. During that advance, the slow stochastic indicator (STOC-S) has reached overbought readings and the relative strength indicator (RSI) has experienced a loss of momentum in the last couple of days.

Price action too has started to stall, and this just below what should be significant resistance. First of all, we have a potential downtrend line from the April highs. It is currently up for a third test and could prove tough to break through on a first attempt. And second, there is what appears to be solid horizontal price resistance. And last but not least, the price has stalled just below its 200 day moving average.

Yesterday this stock printed a Doji candle-stick, which is a signal of hesitation and indecision. A pullback from here would come as no surprise. Support is found at the neckline of a possible inverted head and shoulders pattern. The pattern should be respected, but the price has yet to come back down and retest the neckline following the breakout, a common course of action when it comes to head and shoulders patterns.

A warning to the bulls is that the breakout above the neckline wasn't accompanied by larger than normal volumes, which could indicate a fake outburst. The neckline is located at SEK 309. If the neckline were to break, then the next level of support would be found at SEK 300.

Management and risk description

The plan is to short this stock at market around SEK 320 for a move lower into support at SEK 309 and SEK 300. The stop could be a daily close above SEK 325, which is a level that bears do not want to see broken, while on the other hand it's a level that the bulls would most certainly like to reclaim.

Once the price has reached the first target, it would be time to take partial profits and move stops to entry trading towards the second target.

The main risk to this setup is a break above SEK 325 and broad market strength. If so this stock would most likely go higher still.

Parameters

Entry: At market around SEK 320.

Stop: Daily close above SEK 325.

Target: SEK 309 and SEK 300.

Time horizon: One to two weeks.

Investor AB daily chart
INVEb:xome daily chart

















Investor AB daily development chart
INVEb:xome daily development chart















 
All charts: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more. 


— Edited by Robert Ryan

Non-independent investment research disclaimer applies. Read more
4y
Johan Berntorp Johan Berntorp
To live another day...
4y
Johan Berntorp Johan Berntorp
Investor once again poked above resistance today but failed to close above. It is now quite clear that the SEK 325 level is important resistance.
4y
Johan Berntorp Johan Berntorp
Now let's see if this thing can pick up some steam to the downside. Looking much better now.

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