DJ EuroStoxx50 Futures Volatility Forecast (10/05/2011)

The HyperVolatility team was right once again. The plunge we forecasted the last week fully manifested itself and the surge in volatility we were expecting is clearly visible in the right hand part of the chart.

DJ EuroStoxx50 futures opened at 2,943 dropped to 2,901 on Wednesday and closed at 2,882 on Friday whilst our profit target was set to 2,915 – 2,920. A great trade indeed!!!

The actual volatility is around 1.2% (19% annualised) but the curve does not appear to be aggressively upward sloping and the logical consequence of such a phenomenon is that the down move is now over: the DJ EuroStoxx50 futures will head north again.

The volatility curve will probably mean revert and collapse to 0.85% (13.4% annualised) which is its equilibrium point whilst futures prices should rise and retest the 2,940 area once again even if at this level a bit of a sideways play could occur before a potential definite break out of the resistance point.

The HyperVolatility team is bullish on DJ EuroStoxx50 futures and we will place some longs as soon as possible because the conditional variance is probably going to collapse backing an ulterior recovery of the price. Nevertheless, we will carefully monitor the 2,940 zone because many bears will place their entries at this threshold.

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