EUROSTOXX ? Path of Least Resistance is Up ?

3 min read



Dear Traders,

Global equities have enjoyed a revival over recent weeks and the Eurostoxx index is no exception. Today’s analysis will take a look at the short term wave structure and highlight potential trade setups.

Impulse Places Bulls Back in Command

Eurostoxx is showing renewed bullishness after having spent much of early 2018 within a complex correction pattern. Investors appear to have found their courage again. Although global equity markets are approaching a bigger correction soon, there is still room for some further rallies.

The chart below shows that Eurostoxx has produced an almost complete impulse to the upside since March 26, which could be culminating in an ending diagonal as wave 5 of 5 within the next trading days.

The impulse started at a point that can be considered to have completed a larger bearish correction. A single impulse, without creating a new high is not a complete Eliott Wave pattern (a truncated 5th wave is highly unlikely in this case, based on the broader structure and the fact that price hasn’t even reached the previous high yet).

We therefore require at least one more motive wave to the upside, even if we apply a bearish ABC zigzag count to this price action. The more bullish alternative is a Wave 1 within a bigger bullish impulse.

As such, Eurostoxx is providing a fairly high probability buy-setup at the next dip.

Trade Setups

There is strong resistance between 3600 and 3612, which should act as a terminal zone for the current swing, and initiate a bearish correction. A wave 2 correction will probably be more short-lived than if it were a wave B correction. The key to watch out for is a complete 3-wave correction to the downside. If it looks sharp and impulsive, expect a simple zigzag to be the end of it. If we get 3-wave moves in both directions, expect a more long-winded complex correction. Two key areas for potential dip buying are 3470 and 3520. The lower level could be used as a scale-in option for aggressive traders (subject to sound risk management protocols).

All the best along your trading journey


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