Strategic trade
Trade view / 30 May 2016 at 5:38 GMT

Larger pullback due for power and automation company ABB


Last week we were able to highlight the likelihood of a further rise in the share price for power and automation company ABB (ABB:xome). Even though the trade as such became a bit difficult to enter in a proper way, the analysis appears to have been correct, as the stock rose into the key cycle date of May 27.

On Friday, the price hit the SEK 176 level and managed to trade just above that before closing at SEK 175.90. The connection between price levels and cycles are interesting, as the rise off the January 21 lows and the May 27 rise so far has taken 127 days. This number has a direct relationship with the SEK 176 price on the Gann wheel. The stock could very well experience trouble at this area, now that time and price have become aligned.

The alignment is telling us that we are at an inflection point and ideally price should now go into reverse. A bearish close on Monday would give a further signal that there is a reversal in the making. Resistance is now found at SEK 176, SEK 180 and SEK 186. Support is found at SEK 172, SEK 167 and SEK 160.

Even though there is not a divergence in the daily chart between oscillators and price readings, these reading have reached lofty levels from where they could reverse. Perhaps even more interesting is the daily close outside the Bollinger Bands® signaling a short term overbought condition.

Management and risk description

The plan is to be on the lookout for a reversal in this stock and to sell ABB:xome short at market upon a bearish close today. A bearish close will be defined by a close at or even below SEK 175. The targets are SEK 167 and SEK 160. The stop is a daily close above SEK 176.

Once we break below SEK 172, we could start to lower our stop.

The main risk to this setup is general stockmarket strength.


Entry: Sell below SEK 175.

Stop: Daily close above SEK 176.

Target: SEK 167 and SEK 160.

Time horizon: One to five weeks.

ABB's daily chart
ABB:xome daily chart

ABB's daily development chart
ABB:xome daily development chart
Source: 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
31 May
Johan Berntorp Johan Berntorp
A flat close yesterday make us look for a trigger today instead.
31 May
Johan Berntorp Johan Berntorp
Inspiring price action here at the moment.
14 June
Johan Berntorp Johan Berntorp
First target was hit today.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail