The European defense industry could perform well
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The market environment is uncertain
Based on recent developments, the major U.S. indices may form lower highs. These market conditions are not conducive to momentum-based entry opportunities, which is why few stocks met our screening criteria. Among these, we do not see any opportunities that would offer favorable return potential relative to the risks, so we are not issuing any recommendations this week.
AutoWallis: Earnings Recovery Delayed
Following the latest quarterly results, we have revised our DCF model and earnings estimates. We cut our 12-month price target to HUF 158 and downgrade the shares to Hold from Buy. The challenges facing the Distribution business unit have not been resolved and, if anything, intensified during the first half of the year. This was the key driver behind our downward revisions to this year’s revenue and earnings forecasts.
The European defense sector has come to the forefront in our momentum-based screening list. European companies that stand to benefit from rising defense spending remain the focus of investor attention. Based on our screening, two French companies—Dassault Aviation and Thales—have come into focus. As a manufacturer of Rafale fighter jets and Falcon business jets, Dassault Aviation is a key player in the global aviation industry, while Thales is one of the leading suppliers of defense electronics, radar, communications, and cybersecurity systems. The technical outlook for both stocks has been favorable recently, and significant opportunities may arise based on the technical patterns that have formed. As a result, it may be worth keeping an eye out for long entry opportunities in these stocks in the near future.
Best rated European stocks based on momentum ranking
Compelling technical picture:
Dassault Aviation (daily): A few weeks ago, it began an upward move with a gap that it did not fill, thus sending a strong signal to the market that the curve intends to rise. It has also reached a new swing high in recent days, meaning the structure is bullish. It’s a bit overbought right now, but buying on dips may be advisable. A close below 296 would be a failure. The target price could reach a value between 343 and 375.
Thales(daily): The prolonged sideways movement may be coming to an end. It’s true that the stock hasn’t yet reached a new high, but a correction following a sharp rally—provided it doesn’t drop too low—could present a favorable entry opportunity. It should hold the 250 level in the event of a correction. If it does reach a new high, a buy signal could appear sooner. A breakout from this range could open the door to the 320–343 range.
List of stocks with a chance of a turnaround in the coming weeks
Most popular European stocks
The momentum model supports the creation of a technical based stock list that helps to find shorter-term trading opportunities. The model can be used to identify stocks that show reversal signals following more sustained falls/underperformance. We examine one-year, six-month, three-month, one-month and five-day momentum values, which are used to rank the stocks under consideration. The higher a stock is ranked in the order, the better it technically performs relative to the others. The change in the ranking over time is used to determine the life cycle of the stock.
- In the first table, we collect the stocks that show the most attractive picture compared to the others in a given week based on momentum factors, of which those are also presented in a separate chart where a favourable situation can be identified based on additional technical analysis tools.
- In the second table, we list the stocks that are already worthy of being placed in watchlist status. They are not among the best performers, but they have the potential to improve and signal a turnaround in a few days or weeks.
- In the third table, we have also collected the more popular stocks to help identify their position in the momentum order.
The report shows the results of a technical - quantitative based stock screening, which does not examine the fundamental background/value of the companies. For this reason, risk management/position sizing rules should be designed accordingly.
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