Article / 06 April 2017 at 13:34 GMT

Pandora bubble set to burst

Technical Analyst / Saxo Bank
  • Pandora charts point to downtrend across all time horizons
  • Breach of 660 DKK could see stock head far lower
  • Strong top, reversal pattern supported by all indicators

Shares of Danish jeweler Pandora are headed for a potentially significant 
downward move. Photo: Shutterstock

By Kim Cramer Larsson

We are seeing a downtrend on all time horizons in Pandora shares, i.e. lower lows and lower highs. Taking a look at the chart, we see a monthly shoulder-head-shoulder pattern with the neckline now broken and support at 767 DKK taken out. The next level of support lies at 705 DKK, but it is not strong.

I am almost reluctant to say how far I believe Pandora could drop if 660 (the minimum SHS patten-derived price target is taken out... but let's say that 534 DKK is one figure that come to mind. 

The 660 DKK area is also close to the 0.382 Fibonacci retracement of the whole bubble; 534 DKK is approximately 50% of it and sits very close to the pre-peak level.

Pre-peak is a major correction we always see in bubble scenarios. When a bubble implodes, the price almost always comes down to the peak of the correction at minimum, but it also often proceeds to the low of the correction from there.
Pandora monthly
 Source: Saxo Bank

A closer look at the (complex) shoulder-head-shoulder pattern on the weekly chart shows a broken neckline and a minimum target of 660 DKK (see the horizontal line).

A strong top and reversal pattern is supported by divergence on all indicators.

Pandora weekly
Source: Saxo Bank

Pandora is a bit oversold in the short term but the trend remains down on all time horizons. A bearish break out of the wedge target has been reached. 

We do see some support at 705 DKK, and a bounce could potentially be seen from this area. I do not see a bounce higher than 760-770 DKK as likely even if this proves the case, however. 

Pandora daily
Source: Saxo Bank 

— Edited by Michael McKenna
Kim Cramer Larsson is a technical analyst at Saxo Bank
zombietrader zombietrader
Thank you for the analysis. This morning had a big drop, around -10%! (minimum about 679, not far from the 660 support). it is below SMA 100 days and approaching to the SMA 200 days. Where will it stop? :). Regards from Spain.


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