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WEEKLY SECTORS ROADMAP 12 February 2016

Technical Analysis Cyril BAUDRILLART charts@carax.com +33.1.70.91.67.58

Financials replacing Energy and Materials as market laggards

What’s new this week?

• Financials, especially Banks, is becoming the worst performing sector, replacing Energy and Materials as the main market laggard. I expect this sector to stay highly volatile and difficult to trade.

Strongest calls

• Although I maintain an Overweight rating on Utilities, this sector looks less attractive in the short term after its recent strong outperformance. The widening of spreads between core and Southern European countries could also put pressure on some on these stocks (see Energias de Portugal). Even though I keep an overweight rating on this sector, it could make sense to lock some profits after the recent revival.

• The current consolidation of Information Technology looks like a buying opportunity. Software & Services remains the strongest industry Group and the one that I would reload first.

12 February 2016 2

Ratings on European Sectors & Industry Groups

Worst

Underweight

Overweight

Best

Consumer Discretionary Automobiles & Comp.

Consum. Durables & Ap. Consumer Services Media Retailing

Information Technology Semiconductors Software & Services Techno Hardware & Equi

Utilities Utilities

Energy Energy

Telecom Services Telecom Services

Industrial Transportation Capital Goods Commercial & Pro. Serv.

Health Care Pharmaceuticals, Biotech

Health Care Equip. & Serv

Financials Banks Div. Financials Insurance

Real Estate

Materials Materials

Consumer Staples Food & Stap. Retailing Food Bev. & Tob.

MSCI Industry Groups

MSC

I SEC

TOR

S

SECTORS

INDUSTRY GROUPS

12 February 2016 3

MSCI Europe Consumer Discretionary in EUR

MSCI Europe Sectors

MSCI Europe Consumer Staples in EUR

MSCI Europe Energy in EUR MSCI Europe Financials in EUR

Relative to MSCI Europe

Relative to MSCI Europe

Relative to MSCI Europe

Relative to MSCI Europe

12 February 2016 4

MSCI Europe Sectors

MSCI Europe Industrial in EUR

MSCI Europe Information Technology in EUR MSCI Europe Materials in EUR

MSCI Europe Health Care in EUR

Relative to MSCI Europe

Relative to MSCI Europe

Relative to MSCI Europe

Relative to MSCI Europe

12 February 2016 5

MSCI Europe Sectors

MSCI Europe Utilities in EUR MSCI Europe Telecommunication Services in EUR

Relative to MSCI Europe Relative to MSCI Europe

12 February 2016 6

European Industry Groups – Consumer Discretionary

Automobiles & Components

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

Most significant de-rating since H2 2011 between March and September 2014.

Short-term momentum remains bearish.

Biggest weightings (top 50% market cap)

DAIMLER AG BAYERISCHE MOTORENWERKE AG BMW CONTINENTAL

Other stocks to highlight

VOLKSWAGEN MICHELIN FIAT CHRYSLER AUTOMOBILES NV PORSCHE GKN NOKIAN RENKAAT

12 February 2016 7

European Industry Groups – Consumer Discretionary

Consumer Durables & Apparel

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart has been very complex since early 2014.

It Back to 52-week highs. I keep an Overweight rating.

Biggest weightings (top 50% market cap)

LVMH MOET HENNESSY LOUIS VUITTON S COMPAGNIE FINANCIERE RICHEMONT SA ADIDAS AG PANDORA A/S

Other stocks to highlight

SWATCH GROUP PERSIMMON PLC BARRATT DEVELOPMENTS PLC ELECTROLUX B

12 February 2016 8

Consumer Services

European Industry Groups – Consumer Discretionary

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart is in a sustained long-term bull trend.

Possible start of a trading range after strong outperformance.

Biggest weightings (top 50% market cap)

COMPASS GROUP PLC WHITBREAD PLC CARNIVAL PLC

Other stocks to highlight

SODEXO ACCOR WILLIAM HILL PLC MERLIN ENTERTAINMENT GROUP PLC

12 February 2016 9

Media

European Industry Groups – Consumer Discretionary

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart is in a long-term bull trend.

Start of a pullback this week and completion of a weekly Perfected Setup 9 sell. It suggests that the relative chart should stabilise below last year’s high in the near term.

Biggest weightings (top 50% market cap)

WPP PLC VIVENDI SA RELX PLC RELX NV SKY PLC

Other stocks to highlight

PUBLICIS PROSIEBENSAT.1 MEDIA WOLTERS KLUWER NV PEARSON PLC SES SA ALTICE CLASS A NV EUTELSAT COMMUNICATIONS LAGARDERE JCDECAUX SA KABEL DEUTSCHLAND HOLDING AG

12 February 2016 10

European Industry Groups – Consumer Discretionary

Retailing

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The primary trend has turned bullish since late 2014.

Critical juncture as the relative chart is trying to bounce off key supports. At this stage I keep an Overweight rating.

Biggest weightings (top 50% market cap)

INDUSTRIA DE DISENO TEXTIL INDITEX HENNES & MAURITZ

Other stocks to highlight

KINGFISHER MARKS & SPENCER GROUP PLC DIXONS CARPHONE PLC ZALANDO SPORTS DIRECT INTERNATIONAL PLC

12 February 2016 11

European Industry Groups – Consumer Staples

Food & Staples Retailing

Relative to MSCI Europe

Back to summary table

Relative to MSCI Europe

Technical Rating

Comments on the relative chart

The relative chart was trendless during most of the year 2015.

ST breakout above an important resistance line but I do not feel in a hurry to upgrade as Point & Figure charts are still bearish.

Biggest weightings (top 50% market cap)

TESCO PLC KONINKLIJKE AHOLD NV CARREFOUR SA

Other stocks to highlight

METRO DISTRIBUIDORA INTERNACIONAL DE ALI COLRUYT JERONIMO MARTINS SGPS S/A CASINO GUICHARD PERRACHON SA

12 February 2016 12

European Industry Groups – Consumer Staples

Food Beverage & Tobacco

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

Sharp re-rating observed since September 2015. The relative chart is trading at multi-year highs.

The momentum of the current rally is incredible. I do not like this kind of steep re-rating as it will be difficult to continue this parabolic move.

Biggest weightings (top 50% market cap)

NESTLE SA BRITISH AMERICAN TOBACCO PLC ANHEUSER BUSCH INBEV SA

Other stocks to highlight

SABMILLER KERRY GROUP SWEDISH MATCH AB ORKLA ASA ARYTZA BARRY CALLEBAUT AG REMY COINTREAU

12 February 2016 13

European Industry Groups – Consumer Staples

Household & Personal Products

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The long-term outlook has been bullish since late 2014.

The relative chart is rising too far to fast. High risk of seeing meaning mean-reversal move in the near term.

Biggest weightings (top 50% market cap)

UNILEVER NV RECKITT BENCKISER GROUP PLC UNILEVER PLC

Other stocks to highlight

SVENSKA CELLULOSA B BEIERSDORF AG

12 February 2016 14

European Industry Groups – Energy

Energy

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart has been bearish since 2012 and remains close to a 52-week low.

Stabilisation attempt over the last two months. The weekly TD Combo and Sequential 13 buy signals completed in late December are still valid.

Biggest weightings (top 50% market cap)

BP PLC TOTAL SA ROYAL DUTCH SHELL PLC CLASS A

Other stocks to highlight

BG GROUP PLC ENI TENARIS SA GALP ENERGIA SGPS S/A NESTE LUNDIN PETROLEUM VOPAK NV PETROFAC LTD

12 February 2016 15

European Industry Groups – Financials

Banks

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

After more than three years of stabilisation attempt, the relative chart has resumed its long-term downtrend.

Free fall since the start of the year. It is becoming the worst industry group in terms of momentum rating.

Biggest weightings (top 50% market cap)

HSBC HOLDINGS PLC BANCO SANTANDER SA LLOYDS BANKING GROUP PLC BNP PARIBAS SA BARCLAYS PLC ING GROEP NV

Other stocks to highlight

STANDARD CHARTERED DANSKE BANK KBC GROEP ROYAL BANK OF SCOTLAND COMMERZBANK CAIXABANK SA ERSTE GROUP BANK BANCO DE SABADELL SA BANCO POPULAR ESPANOL BANKIA

NATIXIS SA BANKINTER BANCO POPOLARE BANCA MONTE DEI PASCHI DI SIENA RAIFFEISEN BANK INTERNATIONAL

12 February 2016 16

European Industry Groups – Financials

Diversified Financials

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart has been flat over the last three years.

Start of a significant de-rating since the start of the year.

Biggest weightings (top 50% market cap)

UBS GROUP AG CREDIT SUISSE GROUP AG DEUTSCHE BANK AG

Other stocks to highlight

DEUTSCHE BOERSE LONDON STOCK EXCHANGE GROUP PLC JULIUS BAER GRUPPE AG PROVIDENT FINANCIAL PLC GROUPE BRUXELLES LAMBERT SA PARTNERS GROUP HOLDING AG WENDEL SA INVESTEC EURAZEO SA

12 February 2016 17

European Industry Groups – Financials

Insurance

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart is in a long-term bull trend.

Significant derating over the last two months; no rush to upgrade my technical rating.

Biggest weightings (top 50% market cap)

ALLIANZ SE PRUDENTIAL PLC AXA SA ZURICH INSURANCE GROUP AG SWISS RE

Other stocks to highlight

GENERALI AEGON SWISS LIFE SAINT JAMES’S PLACE BALOISE-HOLDING AG ADMIRAL GROUP GJENSIDIGE FORSIKRING ASA RSA INSURANCE GROUP PLC UNIPOLSAI CNP ASSURANCES MAPFRE

12 February 2016 18

European Industry Groups – Financials

Real Estate

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The year 2015 was volatile for this sector but short-term whipsaws did not endanger the primary bull trend which prevails since early 2014.

The relative chart is again approaching from its 2015 high. Real Estate is the strongest Industry Group of the Financial sector.

Biggest weightings (top 50% market cap)

UNIBAIL-RODAMCO SE REIT LAND SECURITIES GROUP REIT PLC VONOVIA SE BRITISH LAND CO PLC

Other stocks to highlight

DEUTSCHE WOHNEN AG HAMMERSON SWISS PRIME SITE AG INTU PROPERTIES REIT PLC

12 February 2016 19

European Industry Groups – Health Care

Health Care Equipment & Services

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The long-term trend remains bullish.

The relative chart is looking overstretched in the short term but I do not anticipate the start of a major trend change.

Biggest weightings (top 50% market cap)

FRESENIUS SE AND CO KGAA ESSILOR INTERNATIONAL SA FRESENIUS MEDICAL CARE AG

Other stocks to highlight

SMITH & NEPHEW SONOVA HOLDING AG GETINGE B

12 February 2016 20

European Industry Groups – Health Care

Pharmaceuticals Biotechnology & Life Sciences

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The long-term trend is bullish.

The relative chart encountered resistance near the 2015 high in late January. Possible start of a derating.

Biggest weightings (top 50% market cap)

NOVARTIS AG ROCHE HOLDING AG NOVO NORDISK A/S

Other stocks to highlight

SANOFI SA GLAXOSMITHKLINE LONZA GROUP AG GRIFOLS

12 February 2016 21

European Industry Groups – Industrials

Capital Goods

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

This relative chart remains complex and difficult to analyze given the lack of a clear trend over the last few years.

This group has been surprisingly robust during the recent selloff, which is good news. I stay Overweight.

Biggest weightings (top 50% market cap)

SIEMENS AG AIRBUS GROUP NV ABB LTD SCHNEIDER ELECTRIC SE VINCI SA KONINKLIJKE PHILIPS NV BAE SYSTEMS PLC ASSA ABLOY B COMPAGNIE DE SAINT GOBAIN SA SAFRAN SA

Other stocks to highlight

ROLLS-ROYCE ATLAS COPCO AB-A SHS VESTAS WIND SYSTEMS VOLVO CLASS B KONE BOUYGUES THALES WARTSILA GEA GROUP AG SMITHS GROUP PLC

ALFA LAVAL AB COBHAM PLC KONINKLIJKE BOSKALIS WESTMINSTER N MELROSE INDUSTRIES REXEL STOCK SA WEIR GROUP PLC ZARDOYA OTIS SA SULZER AG

12 February 2016 22

European Industry Groups – Industrials

Commercial & Professional Services

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart has made a significant bullish reversal since late 2014.

The rising 200-day MA is an important support.

Biggest weightings (top 50% market cap)

EXPERIAN PLC CAPITA PLC ADECCO SA SGS SA

Other stocks to highlight

INTERTEK GROUP PLC ISS A S G4S PLC SOCIETE BIC SECURITAS B EDENRED

12 February 2016 23

European Industry Groups – Industrials

Transportation

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

• Complex range forming since Q2 2014.

• It remains difficult to have strong views on this group.

Biggest weightings (top 50% market cap)

DEUTSCHE POST AG ATLANTIA A P MOLLER MAERSK B AENA SA INTERNATIONAL AIRLINES GROUP SA

Other stocks to highlight

KUEHNE & NAGEL INTERNATIONAL AG DSV A/S ABERTIS INFRAESTRUCTURAS SA RYANAIR HOLDINGS PLC

12 February 2016 24

European Industry Groups – Information Technology

Semiconductors & Semiconductor Equipment

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The long-term trend is bullish.

Very complex range forming since last year. Anyway, I favour a relative breakout in the medium term.

Biggest weightings (top 50% market cap)

ASML HOLDING NV ARM HOLDINGS PLC

Other stocks to highlight

STMICROELECTRONICS NV

12 February 2016 25

European Industry Groups – Information Technology

Software & Services

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart made a relevant relative breakout in April 2015 and has remained bullish since then.

I think that the current pullback is an opportunity to increase exposure to this leading industry group.

Biggest weightings (top 50% market cap)

SAP AMADEUS IT HOLDING SA

Other stocks to highlight

DASSAULT SYSTEMES SA SAGE GROUP PLC UNITED INTERNET AG ATOS GEMALTO

12 February 2016 26

European Industry Groups – Information Technology

Technology Hardware & Equipment

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart has been trading sideways inside a wide trading range over the last three years.

The pullback registered in late January is significant but I am not convinced that this will mark the start of a significant trend change.

Biggest weightings (top 50% market cap)

ERICSSON B NOKIA

Other stocks to highlight

HEXAGON B INGENICO

12 February 2016 27

European Industry Groups – Materials

Materials

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart has been bearish since 2011.

Start of a new relief rally in early February but at this stage this move looks like another relief rally within a downtrend.

Biggest weightings (top 50% market cap)

BASF SE AIR LIQUIDE SYNGENTA AG RIO TINTO PLC LINDE AG BHP BILLITON PLC CRH LAFARGEHOLCIM LTD

Other stocks to highlight

JOHNSON MATTHEY YARA INTERNATIONAL ASA SIKA REXAM PLC RANDGOLD RESOURCES EVONIK INDUSTRIES AG LANXESS AG

EMS-CHEMIE OCI NV IMERYS

12 February 2016 28

European Industry Groups – Telecommunication Services

Telecommunication Services

Relative to MSCI Europe

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart has been unclear over the last ten years. Significant re-rating underway since 2013.

It remains close to 52-week highs.

Biggest weightings (top 50% market cap)

VODAFONE GROUP PLC BT GROUP PLC DEUTSCHE TELEKOM

Other stocks to highlight

TELEFONICA SA ORANGE TELIASONERA KONINKLIJKE KPN NV ILIAD SA MILLICOM INTERNATIONAL CELLULAR SD TDC A/S TELE2 B

12 February 2016 29

European Industry Groups – Utilities

Utilities

Back to summary table

Technical Rating

Comments on the relative chart

The relative chart made a significant bullish reversal at the start of the year after building a base. This significant trend change is good news for the sector in the medium term.

The relative chart is looking a bit overstretched in the short term (weekly Perfected Setup 9 sell, daily TD Combo and Sequential 13 sell) but I do not expect a major bearish reversal. Just be more cautious in the short term.

Biggest weightings (top 50% market cap)

NATIONAL GRID PLC IBERDROLA SA ENEL ENGIE SA SSE PLC

Other stocks to highlight

CENTRICA PLC UNITED UTILITIES GROUP PLC ENERGIAS DE PORT SA FORTUM SUEZ ENVIRONNEMENT SA RED ELECTRICA CORPORACION SA EDF ENAGAS SA

12 February 2016 30

Technical Analysis Equity Sales Cyril BAUDRILLART, CFTe cbaudrillar@carax.com +33.1.70.91.67.58

Methodology

All technical indicators used in this publication are based on historical prices broadcasted by Bloomberg. Several types of indicators are used in this report such as Bollinger Bands, Oscillators (RSI, MACD), Point & Figure charts, Ichimoku and other technical analysis tools. More details on how to interpret and use these tools are available upon request. Market timing indicators developed by Tom DeMark are also used in this report. The DeMark Indicators are a registered trademark of DeMark Analytics, LLC. Please note that all the content shown are my personal views and based on my own interpretation of the DeMark Indicators using the DeMark Service for Bloomberg. Please visit www.demark.com for more information.

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