The growing concern about the impact on economic activity that the worsening of the pandemic may have in some parts of the world and the economic consequences that may result from the measures aimed at slowing its progress generated on October 28th turbulence in the equity market, both in Europe and in the US.
The declines of more than 3% during some moments of the session led the main stock markets of the Old Continent to reach the support zone that Ecotrader has been waiting for a long time. “It is the base of the wide side that has been limiting the consolidation during the last months,” pointed out Joan Cabrero, a technical analyst.
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An insight into the market
The reach of the 3,000 points of the EuroStoxx 50 or the 6,420 points of the Ibex 35, “was what we were waiting for in order to look for a window to buy European stock,” pointed out the expert who added that “at this point we are clear that we are already in an optimal area to look for a buying window and in no case to sell.” In other words, there is now an opportunity for the laggards to jump on the bandwagon of the bullish market and try to take advantage of the market reconstruction that has been underway since the March lows.
However, this position taking is not without risk, as the loss of support in cases such as the EuroStoxx also highlights the possibility that an upsurge in the pandemic could take the market back to the March lows (20% below current levels), although we would find a stable ground already tested. The risk of a self-feeding downward spiral is great, given the fear that the main European economies will carry out stricter confinements to stop the expansion of COVID-19, as France and Germany have done recently.
The area is unbeatable from a strategic point of view, but at these levels, it would be ideal to wait to see some technical evidence suggesting a sellout before buying. That is, to implement this plan before “we need an upward shift to close the gaps down on Wednesday, i.e. the recovery of the 3,070 points of the EuroStoxx 50,” qualified the Cabrero.
These are the key levels of all the Ibex 35 stocks
The fact that the loss of support presented by one of the great directors of the market, the Nasdaq 100, at 11,450-11,350 points suggests that the consolidation that the selective has been developing since the beginning of September may be framed within a classic normal flat pattern, something that means that in the near future the main technological index could be directed towards seeking support for the September minimum zone at 10,675 points and we do not even rule out that it could seek the 10,300 point zone.
In the case of the Ibex 35, the support zone of 6,420 points was not pierced at any time during Wednesday’s session, leaving the technical scenario in a hot zone but not burnt out. | These are the key levels to watch out for when buying into all the Ibex 35 stocks.
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First published in elEconomista.es, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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