Consumer Staples (XLP): The index after breaking out of a stage-one cup-with-handle base is currently finding
resistance
Author: Tristan d'Aboville
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
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European equities had its best weekly gains since mid-March on back of lower-than-expected CPI print in the U.S. and China easing of COVID-19 restrictions. Growth stocks led the rally. Most majors have retaken their 200-DMA last week, setting up constructively on charts. The next key test for the majors will be to hold their key moving averages on a retest for their move up.
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We recommend an incremental approach to adding risk with focus on high relative strength ideas that are part of leading and/or improving industry groups.
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All sectors except Energy had positive momentum last week, with Technology, Transportation, and Cyclical leading the gains. On our rotation chart, Capital Equipment, Cyclical, Retail, and Basic Material stand out, showing improvement in the short-term momentum. All other sectors are taking a pause in their short-term momentum (over four weeks).
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European Focus List Update:
O’Neil Consumer/Retail Weekly
Consumer Cyclical (XLY): The ETF faced resistance near its 50-DMA and is currently trading along its declining 21-
DMA. The index undercut its near-term support of $133. RS line has been declining over the past nine weeks with RS
Rating at 29.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- European equities gained for the third consecutive week. The Stoxx 600 and nine other indices are in a Confirmed Uptrend. Most majors have retaken their 50- and 100-DMA last week and are heading toward their 200-DMA. The moving averages will provide near-term support and the overhead 200-DMA is likely to act as resistance.
- We recommend a cautious approach to adding risk. However, becoming more incremental is encouraged. Focus on high relative strength ideas that are part of leading and/or improving industry groups.
- All sectors showed positive momentum last week, with Energy, Retail, and Basic Material leading the gains. On our rotation chart, Capital Equipment stands out, along with Cyclical, Retail, and Transportation, showing improvement in the short-term momentum. All other sectors are taking a pause in their short-term momentum (over four weeks).
- European Focus List update:
- Actionable names include Astrazeneca (AZN.GB, AZN:LN), Lvmh (LVMH.FR, MC:FP), Novo Nordisk ‘B’ (NON.DK, NOVOB:DC), Deutsche Telekom (DTEX.DE, DTE:GR), Edenred (EDEN.FR, EDEN:FP), Genmab (GEN.DK, GMAB:DC), Terna Energy (TEN.GR, TENERGY:GA), and Bank of Ireland Group (BIRG.IE, BIRG:ID).
- Addition: None
- Removal: None
O’Neil Consumer/Retail Weekly
Consumer Staples (XLP): The index has formed a downside reversal on high volume after finding supply at its 200-
DMA. The next major support is at 50-DMA. RS line has been trending sideways with RS Rating declining from 81 to 68 in
the last eight weeks.
O’Neil Consumer/Retail Weekly
Consumer Cyclical (XLY): The index is holding above its 21-DMA while finding resistance near its 50- and 100-DMA and sits 32% off highs. In late June, $148 was an earlier level of resistance. Support for the index remains near $135 (-7%).
Consumer Staples (XLP): The index has rallied back from its first week of October lows and has reclaimed its 21-and 50-DMA. However, volumes on this are not convincing. RS line is trending sideways with mixed technical ratings
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
The Stoxx 600 along with 16 other indices we cover are in a Downtrend. Hawkish central banks and recession fears
have added to concerns over high inflation and an energy crisis. The Stoxx 600 along with its regional peers are in a
technical bear market and testing late 2020 levels while making lower lows. A technical bounce back to the moving
averages or prior support levels is probable, but likely to fail given the current structure of indices.
We recommend a cautious approach to adding risk. Major indices continue to make lower lows and lower highs and, in
the process, have breached key short term support levels. We recommend a high cash position, but, if one must commit
capital, remain defensive with a focus on high relative strength ideas that are part of leading and or improving industry.
Sectoral momentum was mixed. Healthcare gained the most while Utility led the decline. On our rotation chart,
Staples is in the best quadrant with positive improvement in short-term momentum. Along with that, Financials, Cyclical,
Utility, and Retail are showing improvement in the short-term momentum while all the other sectors are taking a pause in
their short-term momentum (over four weeks).
European Focus List Update:
Actionable names in the Focus List include Jyske Bank (JYS.DK, JYSK: DC), Bank of Ireland Group (BIRG.IE,
BIRG:ID), and Ipsos (IPS.FR, IPS: FP)
Additions: None
Two removals: Elisa (ELIS.FI) and Neoen (NEOP.FR)
O’Neil Consumer/Retail Weekly
Consumer Staples (XLP): The index is repeatedly forming downside reversals after finding resistance at its upper
channel line. A break below $70 price level will be bearish for the index. The RS line however continues to remain resilient.
O’Neil Consumer/Retail Weekly
Consumer Staples (XLP): The index continues to find resistance at its 200-DMA after forming a downside reversal on
high volume last week. RS line continues to lag with weak A/D Rating.
O’Neil Consumer/Retail Weekly
Consumer Staples (XLP): The index continues to find resistance at its 200-DMA after forming a downside reversal on
high volume last week. RS line continues to lag with weak A/D Rating.