Trade view /
08 August 2016 at 5:25 GMT
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 development chart
Source: Saxo Trader.
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— Edited by Gayle Bryant
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