The automotive sector has found this earnings season challenging, will it be different for Mercedes?

The resistance of €76- €77 for Mercedes-Benz is still overpowering any bullish momentum rally with an attempt to break above it. Such price action leads to two scenarios, either an explosive break higher followed by a rally or a med-long term grind lower. Currently, the motor company’s stock is trading at around €62.49 a share on the German market. The DAX 40 index seems to be now moving lower as it has failed to move above its recent high’s, at this moment in time it is heading for its second consecutive down week. One of the reasons why Mercedes is also in a decline as it is one of the constituents within the index, hence, the correlation in movement. With the company expected to report earnings tomorrow, we know from its competitors who have already reported that this earnings season for the automotive sector has been challenging. But this does not mean that Mercedes can not perform better. However, it will be a challenge as the global market sentiment will certainly weigh on the stock. There is clear support along the lower trendline around €58. The trendline has provided support in the past, therefore, an earnings beat followed by positive guidance could see the price grind lower before consolidating just above or around the trendline. This would offer a base for a rally back up to the upper trendline to challenge the resistance once again. But this will be much dependent on the earnings outcome tomorrow, so caution should remain. The technical indicators are still pointing to more downside, but volume seems to have lowered. Rather similar to the positioning back in November, perhaps history may repeat itself.