European shares fall from 5-month high on Fitch

A trader reacts at his desk at the Frankfurt stock exchange January 10, 2012.

LONDON (Reuters) - European shares fell from a five-month high on Wednesday after Fitch Ratings warned that the European Central Bank should take a more active role in buying troubled euro zone debt to avert a collapse of the euro and as major indices hit resistance levels.

Volume was low and trade was choppy, with the FTSEurofirst 300 index .FTEU3 struggling to gain after it hit technical resistance at 1,028 points - its intermediate high in October 2011 - and fell firmly into the red after the Fitch comments.

Although Fitch said a collapse of the euro was not its baseline scenario, it urged the ECB to scale up its purchases of troubled euro zone debt like Italy and drop its resistance to the bloc's bailout fund to prevent a break out from happening.

The worst performing sectors were the STOXX Europe 600 Food & Beverage index .SX3P and the STOXX Europe 600 Oil & Gas index .SXEP, down 1.7 percent and 1.8 percent respectively, having hit "overbought" territory after gains on Tuesday.

The Relative Strength Index (RSI) - a technical momentum indicator that determines overbought and oversold conditions - for the .SXEP had hit 71.91 on Tuesday, while the .SX3P had risen to 73.08. Seventy and above is considered overbought.

"Fitch is trying to say someone needs to step up to the plate and help," Joe Rundle, head of trading at ETX Capital, said. "People are talking about recession, consumer confidence is low and the worry is how this will filter into companies.

"Volume is low and the money is only from short-term investors. Investors are looking at resistance and support levels and trading within those ranges."

The pan-European FTSEurofirst 300 .FTEU3 index of top shares closed down 0.5 percent at 1,021.97 points after touching 1,029.32 a five-month high where it tested a resistance level.

The index has tested the 1,028 point level - which represents a 61.8 percent retracement of a fall last summer and a level around the 200-day moving average - three times in the last week.

Volume was low at 82.9 percent of its 90-day daily average.

Richard Batty, strategist at Standard Life Investments, expected the market to remain volatile and said "fund flows did not suggest there had been a big move into equities."

He added that the Fitch comments showed that "we still needed a roadmap by policymakers to address the problems in the euro zone debt crisis and the bad news was not necessarily priced into companies and the economy."

Standard Life was remaining cautious on European equities.

(Reporting by Joanne Frearson; Editing by Hans-Juergen Peters)