A gauge of the euro area’s biggest insurers may rally as much as 9 percent in the next two to four weeks as the measure managed to hold above a key level in the aftermath of Hurricane Sandy, according to a technical analyst at Natixis.
The Euro Stoxx 50 Insurance Index (SXIE) dropped 0.9 percent to 148.26 on Oct. 29 as Sandy made landfall. The measure, whose members include Allianz SE (ALV) and Axa SA (CS), surged 37 percent from this year’s low on June 1 through yesterday as European Central Bank policy makers agreed on an unlimited bond-buying plan and the Federal Reserve announced further quantitative easing.
“The short-term outlook is still bullish after the index held above the short-term bullish channel, whose lower limit currently stands at 146.82,” Ouri Mimran said in a phone interview from Paris today. “That confirms and paves the way to the next medium-term resistance area between 162.1 to 164.7.”
Sandy may have caused insured losses of as much as $15 billion in the U.S., modeling firm AIR Worldwide said yesterday. The biggest Atlantic storm in history, spanning an area broader than Texas, came ashore as a hurricane two days ago near Atlantic City, New Jersey.
Millions of American remained without power today following the storm, which caused at least 50 U.S. deaths, according to the Associated Press. In New York City, subway service may not be restored for four to five days, said Mayor Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.
A decline below 146.82 would invalidate the bullish scenario in the short term and trigger a correction of about 4 percent to the 137 level, Mimran said. The Euro Stoxx 50 Insurance Index advanced 1.7 percent to 150.7 yesterday.
“Momentum is still bullish, and we maintain a bullish view for the global market until year-end,” he said. “In the medium term, however, we’re much more cautious.”
In technical analysis, investors study charts of trading patterns and prices to predict changes in a stock, commodity, currency or index. Analysts identify resistance levels, or ceilings limiting further gains, and supports, which act as floors in a declining market.
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