Technical Analyst Sees Europe Indexes in 'Rising Wave'

Monday, 06 Feb 2012 05:14 PM

 

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The Euro Stoxx 50 Index of the euro region’s biggest companies may gain as much as 5 percent in coming weeks after a consolidation period, according to a technical analyst at Aurel-BGC.

“European indexes are in a rising wave,” Gerard Sagnier, a technical analyst at Aurel, wrote in a report Monday. “Still, the risk-rewards are diminishing as the target approaches. It’s not yet time to sell, but instead to wait for any pullback to make final purchases.”

The Euro Stoxx 50 fell 0.8 percent to 2,494.92 at 12:03 p.m. in London, trimming this year’s gain to 7.7 percent. The gauge’s next resistance level is at 2,535, and -- after a period of consolidation -- it may rise as high as 2,620, Sagnier wrote. A decline below 2,290 would end the rally, according to the analyst.

Sagnier said on Jan. 9 that the Euro Stoxx 50 must break the 2,380 level by the end of the month to complete the third part of an Elliott Wave pattern. In the first part of the wave, the measure advanced from late September until Oct. 28. In the second part, the index retreated until Nov. 25.

The Elliott Wave is based on a theory developed by the accountant Ralph Nelson Elliott during the Great Depression and says that prices move in a pattern of five steps followed by three steps. It contends that trends don’t move in straight lines and that they are prone to setbacks. In a five-wave move, stocks fall in waves number two and four.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

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