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SPMIB40 Technical Analysis
On our previous attempt to capitalize over a death cross our analysis did not bear any fruit. We will reattempt to hunt another classic cross but in this case we are seeking to capitalize over a golden cross. The 21-daily moving average (DMA) is threatening a golden cross with the 200DMA (in green) and the 55DMA (in orange).
SPMIB Daily Chart
There is a potential for reversed Head-And-Shoulders (H&S) although the shoulders are not unlevelled, which demands a greater accuracy level for the long trade. The recent dip in the SPMIB40 may allow us to join the moderate gains that began at the beginning of August 2014. The possible fundamental trigger is the final HICP data for Italy and the Eurogroup meeting that are due to be held tomorrow, 12 September, 2014.
The SPMIB40 is a more aggressive when compared to the SP500 by nature. The daily chart demands a protective stop of +200 points (approx.). We are also aware the Italian markets will close soon and our long trade may also be affected by the trading gap on Friday morning. This is one of our toughest decisions but we have no other choice as this is a daily chart. Attempting to fiddle with the protective stop loss order may very well cost us the trade when European markets open tomorrow morning. It is also essential to highlight this is a relatively tight stop bearing in mind the Average True Range (ATR) for the index is over 300 points. If we have identified the reversal price region and indeed execute the long trade at the bottom of the dip, our target is approximately +700 points.
SPMIB Trade Details
Long @ market price
Take profit: 21,675
Protective stop: 20,750
Estimated Duration: 21 days
Risk Ratio (RR): 1 : 3.4 (approx.)
12/09/14 UPDATE: SPMIB40 is trading at 21,065 at the time of this writing. We are closing 10% of the trade at market price.
16/09/14 UPDATE: SPMIB40 continued to retrace lower, triggering our protective stop loss order. We have incurred a loss of +200 points.
Trade alerts are also issued in the weekly update.