Investors Shifted Toward Defensive Positions
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A constitutional crisis in Poland?
As Poland approaches the 2027 parliamentary elections, political tensions are mounting over disagreements concerning the composition of the Constitutional Tribunal. Moreover, the possibility cannot be ruled out that the governor of the central bank could soon be suspended from office in connection with a separate case, potentially deepening the political divide further. Against this backdrop, following an almost uninterrupted rally in recent months, the Polish stock market appears to be losing momentum, while the zloty has weakened to a three-year low against the euro. The domestic political situation may well have further surprises in store, while the Polish equity market, despite its strong performance so far this year, can no longer be considered particularly cheap.
Hungarian Equities - Technical Analysis
The BUX index’s correction has reached a zone that may once again present a selling opportunity; however, for this to materialize, further weakness must be confirmed by a strong day of selling. MOL’s share price continues to trend downward, and further downside potential may open up if it breaks below the low of the past few weeks. Richter has approached its previous key resistance level, from which it has rebounded for now; nevertheless, an upward pattern may continue to form as long as its uptrend remains intact. Magyar Telekom has been in an uptrend for three weeks now, reaching a new high, with no signs of a top yet. Opus remains in a downtrend, and there are no signs of a reversal yet. Rába continued its narrowing movement, which, under the right conditions, could later form the basis for another rising wave.
The sharp correction weighing on technology stocks has so far had a much more limited impact on European markets. In fact, certain sectors are benefiting from the ongoing market rotation, which has been increasingly favoring defensive areas. Pharmaceutical and healthcare companies, in particular, continue to stand out. This week, we take a closer look at Koninklijke Philips, the healthcare technology and medical devices company. Alongside it, BASF, the German chemicals giant, has also moved near the top of our screen. In both cases, the current constructive technical setup has been preceded by an extended period of consolidation, potentially creating attractive opportunities for long positions as the emerging trends begin to take shape.
Best rated European stocks based on momentum ranking
Compelling technical picture:
Koninklijke Philips (daily): The stock has been forming a trend-confirming pattern for nearly four years and is now attempting to break out to the upside. The thick green trendline remains a key technical reference, having been identified from the late-2022 lows, and the share price rebounded from it just a few weeks ago. Meanwhile, the red trendline that has defined the corrective phase is currently being tested from below and could soon be breached. A sustained move above 25 would be a particularly encouraging signal, potentially paving the way toward new three-year highs around 31.25. For now, risk management could be anchored to a close below 21.8, which would invalidate the current bullish setup.
BASF (daily): A lengthy trading range may soon be coming to an end. The stock has been capped by the 55 level for several years, preventing a sustained upward move. However, the series of increasingly higher swing lows suggests that bullish pressure is gradually building and that a breakout to the upside could be approaching. A close above 56.25 would represent an important technical confirmation and could open the way toward the 71.8-75 area. On the downside, risk management should focus on the thick green rising trendline, which continues to define the ideal bullish structure. A break below this support would weaken the positive outlook.
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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