Symbol: DFD.DK

Weekly European Sector Review

Posted on by Tristan d'Aboville

Key points:

  • Leadership continues to emerge in Europe, indicating a persistent favorable trend. Leading sectors this week include Financials and Technology. The iShares DJ Stoxx 600 ( EXSA.DE ) remains in a Confirmed Uptrend with five distribution days.
  • Actionable ideas from our Focus List in these two sectors include Adyen ( ADYE.NL ), Dassault Systemes ( DSY.FR ), and Nemetschek ( NEMX.DE ).
  • We added ASML ( ASML.NL ) back to the Focus List (Long Ideas) this week. Credit Agricole
    ( CRDR.FR ) was added to our European list of Shorts.

European Weekly Summary

Posted on by Tristan d'Aboville

Key points:

The Stoxx 600 is attempting to rally, but it is still too early to turn positive. In order for us to move bullish, we are looking for a follow-through day, rising volume, and for leadership to emerge. We are not there yet and the index remains in a Rally Attempt.

Our Focus List is a good indicator of market health. The decreasing number of ideas reflects our cautious stance toward European equities. We have been lightening up our exposure to Cyclical and, adversely, strengthening our exposure to Health Care.

Actionable Focus List ideas in Healthcare include: Ipsen ( IPN.FR ) and Swedish Orphan ( SOBI.SE )

The new format for this report introduces a list of Shorts displayed in the Sector Score Cards. It Includes:

Solvay ( SOL.BE ): Solvay’s three divisions suffering from adverse FX and higher raw materials, offsetting volume growth.

Adidas ( ADSX.DE ): Topping characteristics. / Short term momentum eroding / (Too) high expectations from the street.

Renault ( RENU.FR ): Momentum deteriorating due to escalating trade tensions between the U.S. and China / Negative newsflow surrounding the alliance between Renault and Nissan / Highly exposed to EM currencies.

Essity ( ESSI.SE ): Raw material price increases, particularly pulp, putting pressure on margins / Aggressive expectations from sell-side analysts.

Siltronic ( WAFX.DE ): Ongoing concerns over iPhone production adjustments, falling NAND prices, and softer demand in the cryptocurrency space.

European Weekly Summary

Posted on by Tristan d'Aboville

Since our last review two days ago, the Stoxx 600 has not been able to hold its May 31 low of 382.14. Yesterday, the index lost  0.9%, breaching its 100‐SMA. Although volume was lower, we are downgrading the index’s market status to a Downtrend.
This move was accompanied by several downgrades among  European countries: France and the Czech
Republic were moved to a Downtrend while the U.K. and Finland were downgraded to Uptrend Under
Pressure.
We reiterate our extremely cautious approach to European equities. Since the Stoxx 600 topped on May
22 after the follow‐through day on April 5, it has been accumulating a high number of distribution days,
translating into a rotation of leadership. Momentum among defensive sectors, namely Staples and
Healthcare, has been rising.

European Weekly Summary

Posted on by Tristan d'Aboville

MARKET SUMMARY

The Stoxx 600’s uptrend has been under pressure since the end of May, reflected by the increasing number of distribution days. This week through Thursday, the Stoxx 600 gained two additional distribution days, bringing its total to six. The index is down 0.46% on a weekly basis, adding to last week’s 1.07% decline. This was its third consecutive weekly decline.

The index is trading near its 50-DMA, which remains a key support level; as long as it holds, the uptrend should remain intact. However, with the recent rise in and concentration of distribution days across different markets, we recommend being very selective in adding new names and sticking to leadership.

European Weekly Summary

Posted on by Tristan d'Aboville

MARKET SUMMARY

The Ishares Dj Stoxx continues to trade constructively above key support at its 50-DMA and 200-DMA. The index breached its January 23 peak, a key level of resistance, despite increasing political uncertainty in Italy.

Increasing Number of EFL Ideas: Adding Trigano ( TRI.FR ) and Wordline ( WLN.FR ) to our Focus List

In such an environment, we continue to recommend allocating more capital toward European equities, with the exception of Italian stocks (market recently downgraded to Under Pressure). This confidence in the market is again reflected by the increasing number of stocks on our Focus List, which includes 31 stocks as of today. Last week we added Trigano ( TRI.FR ) and Countryside Properties ( CSP.GB ). We added Wordline ( WLN.FR ) this week.