Third round for STOXX Europe 600 Banks Index

The STOXX Supersector Europe 600 Banks Index, has been in the last ten years, the worst performer index among he 19 European Supersectors group. Since January 2007 it had performed -63,23%.

In the last ten years this Supersector developed three intermediate uptrends, and the las one started one year ago. Looking to the weekly chart from 2006, we can note a first short but strong uptrend in 2009 (1), a second longer uptrend in the period 2012-2015 (2), and a last one started in mid 2016 (3).

We can note that in mid 2015 we had a false breakout of a symmetrical triangle pattern (a) and the price, after a countercyclical move, arrived until the conjunction between the two triangles lines that are now a resistance level (b), made a pullback and is still returning to that level.

As we can see in the chart below, the three intermediate uptrends have developed, not as a result of a generic rise in the market, but as an increase in the relative strength of the banking sector. The first trend developed a Head and Shoulder pattern (1), the second one a Simmetrical Triangle (2) and the actual a Broadening Wedge upside broken in these last days (3).

If we consider a monthly chart, and we connect the higher high with the high generated by the false breakout of the weekly chart (1), we have a downtrend line that is now touched by the actual price (2), with a marginal zero line breakout of the oscillator (3).

In the daily chart is possible to see that price is in a channel, slightly inclined positively, since November 2016. The relative strength has broken the downtrend line (2), but the oscillator is lagging (1).

All these data indicate that the European Bank sector could be one of the potential Supersectors leaders of the second part of 2017, but we need more evidence of his strength, with the overcoming of the 2009 high at 250 level.

Mario Valentino GUFFANTI – SAMT Vice President – Lugano Chapter – mario.guffanti@samt-org.ch

Disclaimer: the above article is for general information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.