European Stocks to Post Fourth Weekly Gain, KCG Says

European stocks may post their fourth weekly rally as a momentum indicator signaled further gains for the the region’s benchmark equity gauge, a strategist at KCG Europe Ltd. said.

The moving average convergence-divergence line, or MACD, on the Stoxx Europe 600 Index, climbed above zero on July 12, suggesting that a bullish trend is strengthening, Ioan Smith, KCG strategist in London, said.

“The MACD offered a buy signal last week by crossing back above the zero line,” Smith said. “It suggests there may be some short-term upside. In a quiet tape devoid of catalysts, signals like this tend to garner more attention. We will look for a volume increase to confirm the move over the next few days.”

The benchmark Stoxx 600 last week rallied 2.7 percent, its biggest gain since the week ending April 26, as Federal Reserve Chairman Ben S. Bernanke backed sustained monetary stimulus for the world’s largest economy. The gauge rose 0.4 percent to 297.36 at 2:04 p.m. in London.

“I would expect, maybe, a week or so of gains before we’ll look for a change in momentum,” said Smith. “We have a couple of things which could impact sentiment over the next couple of weeks.”

In technical analysis, investors and analysts study graphs to predict changes in a security, commodity, currency or index.

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