Technical Analysis EU50 : 2019-01-04

[IFC Markets]

Deteriorating euro-zone data bearish for EU50
Euro-zone business activity slowed in December. Will the EU50 decline continue?

Euro-zone economic data have been negative recently: expansion of activity in private sector slowed in December. Markit’s composite purchasing managers index for euro-zone slipped to 51.3 in preliminary reading from 52.7 when an uptick to 52.8 was expected. Expansion slowed in both manufacturing and services sectors according to the preliminary readings. Negative business activity surveys were followed by a report consumer confidence deteriorated further in December. And Market reported couple of days ago manufacturing sectors slowed both in Germany and France. Growth in Germany’s manufacturing sector slowed again in December due to decline in new orders at the fastest rate in four years, whereas France’s manufacturing sector contracted. Negative euro-zone data are bearish for EU50.

On the daily timeframe EU50: D1 continues declining after hitting 11-month high in mid-May 2018.

• The Parabolic indicator has formed a sell signal.
• The Donchian channel indicates downtrend: it is tilted lower.
• The MACD indicator is below the signal line with the gap widening. This is a bearish signal.
• The stochastic oscillator is rising but has not reached the overbought zone.

We believe the bearish momentum will continue after the price breaches below the lower Donchian boundary at 2902.59. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the upper Donchian channel at 3105.35. After placing the pending order the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop-loss level (3105.35) without reaching the order (2902.59) we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary
Position Sell
Sell Stop Below 2902.59
Stop loss Above 3105.35