IFC Markets - Analytics

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    Technical Analysis PCI : 2015-04-29

    EU stocks probable pullback

    Today we present you the Personal Composite Instrument chart, which traces European stock indices. It has the following composition: DE30, FR40 and GB100 in the base PCI part, quoted by the EUR. Since the beginning of the year the PCI has added 17.5%, which is close to STOXX Europe 600 surge by 16.5% (the sharpest growth for 14 years). During the same period American S&P 500 increased only 2.5%. To be noted, STOXX 600 advanced just 5.9% in conversion to dollars. Thus, the EUR/USD 8.2% drop since the beginning of the year contributed largely to our PCI growth. Very weak GDP data, published in the USA on Wednesday, strengthened the euro against the dollar and undermined European stocks. In particular, German DAX has recorded the maximum daily drop since March, 2014. Moreover, Greek default concerns produce additional negative effect. The common currency may grow further, followed by retreating European shares. On Thursday CPI and employment data will be issued in Europe; the tentative outlook is positive for the euro.

    PCI

    The &Indices_EU instrument has breached the uptrend support line and four recent fractal lows. Bollinger indicator hasn't expanded yet, but the chart has already moved close to its lower boundary. We assume that the momentum may boost volatility. MACD have been indicating buying for quite a while. Its bars are located above zero and below the signal line, confirming a bearish movement. Parabolic has pulled back. RSI Bars has been moving down and showing slight descending divergence. It has breached 50 but hasn't yet got to the overbought zone. We do not rule out further bearish momentum and suppose that a position may be opened right away or as soon as the instrument pulls back on the daily time frame. Indicators' signals would be confirmed if the &Indices_EU daily bar closed below the Bollinger bottom at 9346. Stop loss may be placed at the latest Parabolic mark (9755) or at the breached uptrend level – 9575. After pending order activation the stop loss is to be moved every 4 hours near the next fractal high following Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss without reaching the order, we recommend cancelling the position: market sustains internal changes that were not considered.

     

    Position Sell
    Sell stop above 9346
    Stop loss above 9755 or 9575

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