Short term
Trade view / 09 November 2015 at 5:48 GMT

Looking to fill a gap in Electrolux price

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

The stock of Swedish company Electrolux (ELUXb:xome) fell sharply over last weekend into the open on Monday November 2. This has created a large gap in the chart, a gap that is possibly set to be closed in the coming days.

Looking at this stock longer term it has (like many other stocks) been in trouble since early this year, but as of yet the 200 Day Moving Average is still in an upward tilted position. Interestingly enough the 200 DMA is located at the SEK 251 level which is right were the aforementioned gap is located. This is likely an area of resistance.

Looking at the price action off the most recent peak set on October 23 when the third quarter earnings were announced, it appears as though price might be ripe for at least a short term bounce as the daily oscillators are turning higher, the Slow stochastic indicator (STOC-S) is turning higher off oversold conditions. ELUX has managed to form what appears to be a short term double bottom.

Friday this stock printed a positive candle-stick. Support is located at SEK 234 and resistance at the SEK 251 level.

Management and risk description

The plan is to buy this stock for a short-term trade, to close the gap at SEK 251. Entry could be made on bullish follow through above Friday's close meaning price action above SEK 241.50. The stop could initially be placed at SEK 233. Let price action settle a bit before engagement.

The risk to this setup is general market weakness which could push this stock through our stop.

Parameters

Entry: Above SEK 241.50

Stop: SEK 233

Target: SEK 251

Time horizon: This week

ELUXb:xome daily chart
ELUXb:xome daily chart
 

ELUX daily development chart
ELUXb:xome daily development chart Source: All charts Saxo Bank - create charts with SaxoTrader. Click here to learn more 


— Edited by Adam Courtenay

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4y
Johan Berntorp Johan Berntorp
The gap was almost closed yesterday before a reversal took place. One could move the stop to entry not to risk losing from a setup that started out quite well. This since there is a risk for another bearish swing lower once the gap has been filled/challenged.

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