European stock markets need a break “to gain new strength”

European stock markets need a break
European stock markets need a break

European stock:

  • The 3,524 points of the Eurostoxx, the dividing line between consolidation and correction
  • At the December lows, the return/risk would be attractive.
  • What to do today if you invest with Ecotrader

In the midst of a season of results that is leaving more positive results than initially expected by analysts and investors -at least in the US, where it is more advanced-, the main stock exchanges in Europe begin to show with their consolidation in recent weeks, a manifest buyer exhaustion.

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“We already warned at the time of how complicated it was that the rise that the European stock markets developed during the first week of the year could continue without first seeing a pause that would serve for the buying pressure to gain new strength,” says Joan Cabrero, analyst Ecotrader technician and advisor who emphasizes that with the last consolidation the continental indices have remained one step away from the support that separates a consolidation from a correction.

The dividing line that separates a pause in the ascents such as the one we are seeing from a correction that would threaten to seek support at the December lows – that is, that would take the main European benchmark to 3,400 points – is at 3,524 points of the EuroStoxx 50. This is the minimum set by the main European stock markets during the first week of the year.

However, as the expert assures in his weekly strategic commentary, a loss of these levels should not be seen as a negative thing, but its transfer and the subsequent reach of the December lows, “we would see it as a new opportunity to buy a stock market with a more attractive return / risk equation “.

“It would be a second occasion to get on a bullish reconstruction process that has as its first objectives the area where the indices were trading before the Covid crash,” says Cabrero.

“Purchases made in the December minimum zone would present an attractive risk-return equation since from 3,400 points of the Eurostoxx 50 there is a journey of almost 15% to the maximum of Covid at 3,867 points, while the risk to be assumed It is much lower since it would be just over 5%, since we consider that in the worst case the main European benchmark could correct up to 3,175-3,200 points, which would mean an adjustment of two-thirds of the entire last rally bullish, something that we see quite difficult to happen, “says the expert.