Euro-Area Stocks May Slide After Flip: Technical AnalysisAdria Cimino
The Euro Stoxx 50 Index will decline after futures trading on the gauge of euro-area stocks formed a pattern that indicates the recent rally has reached its end, according to a technical analyst at BBSP SAS in Paris.
Euro Stoxx 50 futures on Jan. 31 made a bearish price flip, meaning the closing price on that day was lower than the final price four trading sessions earlier.
“This reflects a change of dynamic in the short term,” Jean-Charles Gand, a senior market strategist at the brokerage, said in a telephone interview. “Friday’s close didn’t reverse this and today if we close at the same levels, it will be confirmed again. I would look to benefit from a correction to reinforce positions.”
Gand said futures expiring in March may drop to 2,664.5, during the next five days. In the longer term, Gand has a year-end target for the Euro Stoxx 50 of 3,710, which represents a 37 percent rally from the close on Jan. 31. The equity benchmark slid 1.2 percent to 2,677.4 at 12.30 p.m. in London today. The Euro Stoxx 50 has climbed for the last eight months, its longest such winning streak since July 1998.
The world’s developed stock markets have posted their best start to a year for two decades. The MSCI World Index of equities in 24 markets rose 5 percent in January, its biggest advance since 1994, as individual investors pumped record deposits into mutual funds, U.S. profits increased for an 11th quarter, central banks held interest rates at record lows and growth from Europe to China improved.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.