U.S. Earnings Season Ends
In this review, we suggest considering the personal composite instrument (PCI) "Stock index - industry". It includes the stocks of the largest US industrial companies. The Industrial_Stocks index may decline, amid the emerging difficulties with the approval of the US President Donald Trump’s tax reform. Market participants fear that its implementation will require much more time than planned. In addition, a significant part of the reform may be contracted.
On the daily timeframe, Industrial_Stocks remains in the rising trend, but its growth has slowed down and some technical analysis indicators have formed Sell signals. The downward correction is possible in case of the publication of negative economic and corporate information in the US, as well as in case of some problems in Trump’s tax reform.
- The Parabolic indicator gives a bearish signal.
- The Bollinger® bands have narrowed, which means lower volatility.
- The RSI indicator is above 50. It has formed a negative divergence.
- The MACD indicator gives a bearish signal.
- The bearish momentum may develop in case Industrial_Stocks drops below the two last fractal lows and the lower Bollinger band at 124.8. This level may serve as an entry point. The initial stop loss may be placed above the last fractal high, the historic high, the upper Bollinger band and the Parabolic signal at 130.8. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 130.8 without reaching the order at 124.8, we recommend cancelling the position: the market sustains internal changes that were not taken into account.
Technicals
Position: Sell
Sell stop: below 124,8
Stop loss: above 130,8