The Milan index had a subtle, yet strong day as the market crossed the 16,000 level. This market is currently trying to break above overhead resistance, and it seems as if it is gaining a bit of momentum as time wears on.
Looking at this index, it does seem that Italian stocks are primed to go much higher. We have had a fairly wicked pullback recently, but as you can see we have wiped out most of those losses. Also, it should be noted that the pullback occurred after an extremely strong month of August in this market.
This in mind, we are looking to buying this market in general, and Italian bank stocks as well as other high beta names. However, we would like to see some type of pullback as we are so close to a massive resistance area. Once we get that, we will be more than willing to buy supportive daily candles.
The Italian index had a strong session on Wednesday as the recent consolidation level was overtaken by the buyers. The 16000 level gave way, and as such it looks like we are going to go much higher in this market. This is more than likely predicated upon the idea of the Spanish asking for a bailout soon, and as such we think that this market could continue higher as long as there is no firm denial from Madrid.
We will buy on pullbacks, focusing mainly on banks and higher beta names like that. Remember, the European Union has been a virtual minefield for banks lately, and many of them are knee-deep in Spanish government bonds. If the Spaniards get bailed out, this can only help out banks across the continent. Needless to say, Italian ones will be any different.
The Milanese Index rose during the Tuesday session in order to break through several resistive candles over the last week or so. The move was impressive as it broke through several shooting stars, and parked at the 15,960 level. The area is the site of the previous gap, but it has been filled recently, and we suggest that perhaps it won’t be the barrier that many would suspect.
Judged upon the last couple of moves in this market, we suspect that Italian stocks will do well in the coming weeks. Obviously, with the Tuesday candle closing at the very top of the range we suspect that Wednesday should be a fairly decent day barring some type of headline shock.