Short term
Trade view / 23 August 2016 at 5:27 GMT

SWE30.I on the verge of a large swing lower

Instrument: SWE30.I
Price target:
Market price:

With the time cycle peak set on August 12 and the subsequent price peak on August 15, the SWE30 Index looks to be in trouble. From the low set on February 11, the risk of a completed cycle is obvious. 

The peak last Monday at 1,426 was a Gann pivot that stands in a 360 degree relation to the low set on July 6.

Time cycles add up for a peak both counting as shown in the chart below but also if one was to start the cycle count off the June 16 low. The alignment indicates at least a larger correction lower and is a hint of the possibility of new lows to come. 

The wave pattern off the July 6 lows show five swings higher, following a five wave move higher the market should be able to get at least a longer pause, which should ideally take a three wave structure.

Looking all the way back to February 11 one can make the case for a completed ABC pattern, with the not-so-positive and outright ominous characteristic of printing new lows in relation to the February 11 low.

The conclusion is that this could be a so called running correction which are often followed by a very strong move in the opposite direction, in this case down.

As a reference to what running corrections are capable of, consider the one completed on the OMXS30.I (SWE30.I) with a low on October 16, 2014 - which in that case was bullish. 

In the last four sessions this market has tested the Gann 1388 pivot three times. It holds so far.

If this market can manage a solid break below this line we can expect momentum to pick up on the downside. Yesterday's candle printed a small size body, a break lower here would be a short term bearish signal.

Resistance above 1,388 is found at 1,394, 1,407 and 1,412. Support  below 1388 is found at 1,377, 1,369, 1,359 and the to bulls the very important 1,350 level.

Management and risk description

A break below 1 388 should spark at least short term bearish momentum. The plan is to sell a break below 1 388 for a move into the 1,377, 1,369, 1,359 and possibly even 1,350 during the course of the coming week.

If we get a break lower, a move back to 1,407 would signal a reversal why this is a good level to place an initial stop. Once we break below the 1,377 pivot one could move the stop to 1,394.

The risk to this setup is a fake break lower which is quickly reversed. One should be especially wary of such an event right at the opening of the trading session.


Entry: Sell below 1,388.

Stop: 1,407.

Target: 1,377, 1,369, 1,359 and 1,350.

Time horizon: One to 10 days depending on target.

SWE30.I daily chart
SWE30.I daily chart
SWE30.I hourly chart
SWE30.I hourly chart
SWE30.I daily development chart
SWE30.I daily development chart
Source: All charts, Saxo Trader - create your own charts with SaxoTrader. Click here to learn more 

— Edited by Adam Courtenay

For more on equities click here         

Non-independent investment research disclaimer applies. Read more


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