Bloomberg News

Euro Stoxx 50 May Advance 12% This Quarter: Technical Analysis

February 17, 2012

Feb. 16 (Bloomberg) -- Euro-area stocks will extend their rally since last September’s low if they climb above their next resistance level this week, with the Euro Stoxx 50 Index leaving its current trading range, according to Danske Bank A/S.

The benchmark measure will surge to 2,800 by the end of March, a 12 percent rally from yesterday’s close, if the gauge advances beyond its current resistance level of 2,600 this week, a technical analyst at the Danish lender said. The Euro Stoxx 50 has traded within a band, known as a flag, from the beginning of this month as the index consolidates its gains before resuming its rally from last year’s low, Danske Bank said.

“The gauge may break free of 2,600 this week,” said Lars Skovgaard Andersen, a senior equity analyst who helps manage about $107 billion at Danske Bank’s asset manager Danske Capital in Copenhagen. “That will clear the way to move to the 2,800- level. That’ll follow just as you say B after saying A.”

The benchmark measure has traded between 2,476.92 and 2,600 since Feb. 2. The upper limit of this band was formed on Aug. 1 when the Euro Stoxx 50 dropped below 2,600 and the lower limit was set on Oct. 27 when the gauge rallied to 2,476.92, Andersen said. The two values form lines that mark the top and bottom of a rectangle known as a flag in technical analysis.

The Euro Stoxx 50 gained 0.2 percent to 2,493.96 at the close in Paris yesterday as a report showed that the economy of the 17 nations that use the single currency shrank 0.3 percent in the fourth quarter, a narrower contraction than the 0.4 percent median estimate of economists surveyed by Bloomberg.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

--Editors: Will Hadfield, Andrew Rummer

-0- Feb/13/2012 15:01 GMT

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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