Medium term
Trade view / 08 August 2016 at 5:25 GMT

Third wave breakout possible in Volvo


This coming week should prove to be an interesting one. Last week the Swedish industrial complex hit cycles that called for a possibly completed correction off the lows set in January; this is also the case for Swedish truck maker Volvo (VOLVb:xome). This situation is very interesting from a trading perspective, because if bears fail to break the market lower, the alternative could and should be a potentially quite potent move higher.

Looking at price levels, we have support at SEK 86 and the SEK 80 area. Resistance is found at SEK 91, which is our breakout pivot. From then on we have key resistance at SEK 99 – SEK 101 and SEK 111.

If we get a trigger to go long, cycles are telling us we should once again be weary of a reversal around August 24 and September 26 with the latter as more important as a complete wave pattern following a breakout needs time to develop.

The wave pattern we are looking at is that of at least an ABC corrective move higher, which could have completed at the end of July but a break higher at this juncture would instead be hinting at an extension of that cycle in a third wave breakout within a wave C higher. 

Bears would be interested in breaking the SEK 80 level for confirmation of last week's time alignments.

Management and risk description

We are in an inflection point and with the bears having a slight advantage in VOLVb:xome it is important not to jump the gun. A break above SEK 91, in this case defined as a daily close above this level, is at this point in time a signal to go long for higher prices during the course of late summer early autumn. Targets are upon a bullish trigger, SEK 99 and SEK 111. The stop could initially be placed at SEK 86.

Even though the picture at this juncture appears quite clear, break higher or move lower, the main risk is that the price of VOLVb:xome has established a trading range with a back and forth whipsawing.


Entry: buy a daily close above SEK 91.

Stop: a daily close below SEK 86.

Target: SEK 99 and SEK 111.

Time horizon: about six weeks.

VOLVb:xome daily chart
VOLVb:xome daily chart
Source: Saxo Trader 

VOLVb:xome daily development chart
VOLVb:xome daily development chart
 Source: Saxo Trader. Create your own charts with SaxoTrader; click here to learn more 

— Edited by Gayle Bryant

For more on equities click here

Non-independent investment research disclaimer applies. Read more
18 August
Johan Berntorp Johan Berntorp
This setup still has the chance. Still the same trigger changes really, question is if it'll go for it or break down.
25 August
Johan Berntorp Johan Berntorp
Make or break, since yesterday was a cycle date a break above SEK 91 from now on signals higher prices into the next cycle date. It appears the whole market is at a very important juncture, including Volvo.
31 August
Johan Berntorp Johan Berntorp
Hmm, I would really have liked to see a more explosive break...but it has managed to get above the SEK 91 level and we actually have an inverted head and shoulders pattern as well.
06 September
Johan Berntorp Johan Berntorp
We saw a reaction at the Gann SEK 96 pivot which need to be cleared (obviously) for more upside. We are most likely heading higher still even though we might see some weakness from here for a while.
12 September
Johan Berntorp Johan Berntorp
This trade was good in the green, and as such we do not want to allow it to go red. I think one can take what little profit is left and await further developments. SEK 96 was lost this morning, it needs to get above this level for more upside in the short to medium term.


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