STOCKS NEWS EUROPE-EADS shares rally, gain technical momentum

Shares in aerospace and defence company EADS , in merger talks with UK peer BAE Systems , rise 3 percent, gaining technical momentum after moving back above a key resistance level and with charts showing the stock's recovery rally gaining traction.

The stock, which sank 19 percent after news of the talks first emerged last month, moves back above 25.39 euros, which represents a low hit in early June, and tests 25.70 euros, a low hit in late June.

The stock's relative strength index (RSI), a widely-used momentum indicator, is also sending a bullish signal, with the RSI forming higher lows while the stock hits lower lows, a divergence which usually signals a potential rally in the stock.

Other momentum indicators such as the Moving Average Convergence Divergence (MACD) and Stochastics-Slow also signal a reversal of the recent slump.

The stock's next target on the upside is at 26.60 euros, representing the lower end of a gap left open following news of the merger talks. Above that the next target will be 27.84 euros, which represents both the upper end of the gap and the stock's 200-day moving average.

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