Europe Stocks May Drop 10 Percent: Technical Analysis

Euro-area stocks may drop as much as 10 percent by the end of October if the region’s benchmark index closes below its 50-day moving average, a technical analyst from ING Bank NV said.

Closing below 2,739 will confirm a bearish trend for the Euro Stoxx 50 Index, with the next support at 2,673. The gauge may fall as low as 2,470 in the coming weeks as a so-called broadening formation develops, according to Roelof-Jan van den Akker.

A broadening formation is a pattern that shows uncertainty, with sharp volatile price movements within its boundaries.

“Momentum is deteriorating, confirming the current difficult status of the market,” Van den Akker said by telephone from Amsterdam. “Right now, it looks like a normal decline without panic. But I don’t see any signs of a bottom within this decline, which tells me we’re not there yet.”

The Euro Stoxx 50 fell 3.7 percent to 2,721.37 last week amid concern that possible military action by the U.S. against Syria may escalate into a larger conflict in the Middle East and push up oil prices. The gauge rose 0.6 percent to 2,774.45 at 1:44 p.m. in London today.

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

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