M. Stanley: "European stocks are undervalued, focus on them"

No other region has suffered large-scale outflows this year as much as Europe. According to Morgan Stanley, it is time for traders and investors to look back on the old continent as an opportunity to buy and make profits in the medium term.

"From a relative point of view, Europe looks more and more attractive," said Graham Secker, a Morgan Stanley strategist. According to Secker, despite China's trade problems and the fall in stock markets there, Europe is the region with the largest outflow, so the stock is currently considered to be highly underestimated.

Another reason why the bank is optimistic about European stocks is the rally expected at the end of the year.

According to MS, Italy remains the main risk to European markets, but the bank emphasizes that the risk stems only from the ratings of various rating agencies.

Let's look at the main European indices

CAC40

In the last three months, the price has entered a triangle formation that is still not activated. The long-term trend, however, remains long, and the statistics indicate that the triangle is more a trend of an ongoing formation than a trending turn. Entering current levels with Long will be too risky, weighing the fundamental factors that put pressure on European companies. Therefore, it's a good idea to wait for the triangle to be up and down and then to position the triangle. Sequential counts down 2, signaling a new downward impulse. DeMarker remains in a neutral zone. Judging by the indicators, we will most likely see a deeper correction before the fall rally and a fake breakdown in the downward direction.

DAX30

The index went into consolidation and, like the CAC40, lies in a narrowing triangle. Here 50 and 200SMA remain sword-located, as Sequenatial also counts a pair from below. The most likely scenario at the moment remains a breakthrough in the downward direction before the start of the Long Trend. In DAX30, the decisive factor will be the political environment in Germany, as well as the foundation behind the automotive sector.

Source: Bloomberg Finance L.P.

Charts: Used with permission of Bloomberg Finance L.P.

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