Friday, 15 June 2012

Greek stocks turn strongly upwards

 Greek elections are going to take place this Sunday and everyone in europe has one eye on the result and the other on a sell button. Greek stocks on the other hand rallied the last two days. Banks made almost a 30% plus upward movement discounting the positive result of a New Democracy win.
 The market will interpret a New Democracy win as a good result. The market has already discounted part of the result. Increased volume and strong upward movement has pushed the index above resistance levels and outside of the downward sloping channels.

As can be seen in the following two daily charts, that depict National Bank of Greece and Eurobank, there are lots of similarities with the rally at the beginning of the year. Increased volume, break of resistances, break of downward sloping channels, break of EMA and the form of the rise look very similar to what happened in early January that resulted in a huge rally.

 First attainable target for prices to go after the elections is the level they were in early May during the first elections. NBG could test 1,70€ and if volume stays high and higher highs are made, the stock could reach 2€ and even higher. EUROBANK has not declined as much as NBG and has less road to cover to reach early May levels. At 0,70€ is the first resistance and the next one is at 1€.

 The positive scenario expects the market to continue to rally specially if  good election result is combined with steps taken by the ECB to help the european banking sector. The target of this scenario could be higher than the February highs.

The negative scenario will see the market rise only for a while after the elections as the pre election rally might have discounted any good result. If the newly appointed government in Greece after the elections shows the same inability to change things, the market will come back down. 

In the case that the leftist party SYRIZA wins the elections one thing is for sure...panic will prevail in the markets. The markets have shown that they preffer a New Democracy win and want to avoid any possibility that a government will be formed under the leftist party. It was rumored yesterday that central banks are prepared to encounter such an event by providing liquidity if needed.

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