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European Weekly Review
17 March 2014
             By S Gale, Analyst

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Europe Weekly Index Summary
 CloseWeekly
Volume
Weekly ChangeP&F TrendStop
Euro Stoxx 308.412,076.8m-9.92-3.1% Bear 13 Mar 2014 325.00
Euro Stoxx 50 3004.643,086.9m-90.67-2.9% Bear 12 Mar 2014 3175.00
France CAC40 Index 4216.37625.9m-150.05-3.4% Bull 30 Jul 2012 4050.00
Germany DAX Index 9056.41481.6m-294.34-3.1% Bear 3 Mar 2014 9600.00
Netherlands AEX Index 382.65484.9m-13.63-3.4% Bull 9 Aug 2013 375.00
Spain IBEX 35 Index 98121,581.4m-352.20-3.5% Bear 14 Mar 2014 10400.00
Sweden OMX Index 1326.82420.5m-31.54-2.3% Bear 14 Mar 2014 1380.00
Switzerland SMI Index 8114.02178.5m-264.56-3.2% Bear 13 Mar 2014 8500.00
Closing prices last 5 days
European Macro Outlook
The past week has seen the European indices continue to sell off against the back drop of the Ukraine crisis and fears over China's growth slowdown. Tensions increased last week between Ukraine and Russia as the Crimean region held an illegal referendum over the weekend as to whether it should join Russia or not. Over 95% voted to leave Ukraine and join their neighbours Russia, prompting the US and EU to impose economic sanctions on Russia and Crimean officials as warning for the situation not to escalate. Disappointing data from China escalated fears of its growth slowdown and the possibility of defaulting onshore debts. The Euro currency continued to strengthen until Mario Draghi commented on Thursday, that the ECB were monitoring its strength in regards to the Eurozone's persistent low inflation, but to little effect as rallied the next day. Monday saw February's Eurozone inflation slip back to 0.7% from 0.8% as estimates remained unchanged, which could add further pressure on the ECB to alter its monetary policy at the next month's meeting. We anticipate a possible bounce from support as indices become oversold and approach or have found support at the bottom of their short term ranges, but we remain wary of any changes to the situation in Ukraine and any new further data pointing to China's growth prospects.
Stock Index

The Euro STOXX 50 Index extended its failure from recent highs; we maintain an expected short term trading range of 2,950 to 3,150.

 

The Euro STOXX 500 Index extended its failure from the highs, finding its medium term uptrend.

 

The German DAX Index also failed last week but now finds uptrend support at the 9,000 level; we expect this level to hold and anticipate an uptrend reassertion.

The ratio of the DAX against the SX5E finds its medium term uptrend.

We also note the DAX finding the bottom of the range against both the Spanish IBEX and Italian SPMIB as it finds support against these indices and becomes oversold.

Index Breadth

The All-Europe % 10 Week Moving Average Breadth Indicator fell sharply to find the 40% level and becomes oversold.

Sector Bulls & Bears

The European Chemicals sector finds support at the bottom of the short term range at 860.

 

The European Industrial Goods sector finds short term support 570 and also finds relative support.

 

The European Autos sector finds its medium term price and relative uptrends.

 

The European Utilities sector maintains its price uptrend and confirmed its break to new short term relative highs; next resistance is at 280.

 

The European Telecoms sector develops its short term price top below resistance at 300 and encounters its relative downtrend.

Stock Action

During the week, we flattened our net long position, with the anticipation to increase back to a slight net long position.

We opened a long position in Statoil as it made new short term highs on bullish VAD.

 

We also opened a long in Air France as it found price support at 50 and medium term relative support.

 

We closed long positions as they hit our stops in ING, Deutsche Post, Delhaize, ABB and UBS. We highlight our close and taking profits (37.69%) in Kabel Deutschland as it broke short term support at 100 to unwind from overbought highs.

 

We opened short position in Voestalpine as it reasserted its short term price and relative downtrends.

 

We opened a short in BNP Paribas as it formed short term price and relative top formations.

 

We also opened a short trade in Julius Baer as it made new short term lows on weak VAD.

Model Portfolio
Longs
Date Stock Code Type Open Price Current Price % P&L Stop Comment
20 Sep 2013 Hennes & MauritzHMB Long 266.4 281.2 +5.56%263
18 Oct 2013 SodexoSW Long 72.4 76.04 +5.03%71.5
30 Jan 2014 EricssonERICB Long 80.1 81 +1.12%76
6 Feb 2014 Accor SAAC Long 36.165 37.28 +3.08%34
21 Feb 2014 Total SAFP Long 45.6 46 +0.88%43.5
21 Feb 2014 Saint-GobainSGO Long 42.78 41.1 -3.93%38
25 Feb 2014 GeberitGEBN Long 274.3 281.7 +2.70%255
27 Feb 2014 InvestorINVEB Long 227.5 218.8 -3.82%215
4 Mar 2014 Swedish MatchSWMA Long 207.8 202.4 -2.60%195
5 Mar 2014 Den Danske BankDANSKE Long 145.8 141.8 -2.74%134
14 Mar 2014 Airbus GroupAIR Long 49.96 49.96 0.00%47.5
14 Mar 2014 StatoilSTL Long 165.2 165.2 0.00%154

Shorts
Date Stock Code Type Open Price Current Price % P&L Stop Comment
8 Nov 2013 VallourecVK Short 42.17 36.585 +13.24%46
3 Dec 2013 ENIENI Short 17.21 17.13 +0.46%18.4
11 Dec 2013 Ebro PulevaEBRO Short 16.37 16.195 +1.07%17.3
21 Jan 2014 OMV AGOMV Short 34.795 31.39 +9.79%36.8
31 Jan 2014 Deutsche Bank AGDBK Short 35.89 31.065 +13.44%37.6
18 Feb 2014 Deutsche Boerse AGDB1 Short 58.8 55.51 +5.60%62
7 Mar 2014 BMW AGBMW Short 81.86 79.26 +3.18%84.5
7 Mar 2014 ANHEUSER-BUSCH IN BEV NVABI Short 74.2 72.16 +2.75%78.5
10 Mar 2014 Unilever NVUNA Short 28.125 27.72 +1.44%29.2
10 Mar 2014 VoestalpineVOE Short 31.055 28.78 +7.33%33
13 Mar 2014 BNP ParibasBNP Short 56.44 55.26 +2.09%61
14 Mar 2014 Julius Baer Holding AGBAER Short 38.82 38.82 0.00%41
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