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The CAC40 Turns Lower Under Support

The CAC40 Turns Lower Under Support

Walker England, Forex Trading Instructor

Talking Points

  • The CAC40 breaks below trendline support at 4,320
  • Next price support is found at 4,223
  • Bullish daily reversals begin over 4,400

CAC40 1Day Chart

(Created using Trading View Charts)

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The CAC40 is currently trading down -0.45% this morning after breaking out below a key value of support near 4,320. Support, as seen in the graph above, is depicted as an ascending trendline. With this morning’s decline, it opens up the CAC40 to resume trending lower. To validate this move, traders should continue to monitor both the January 26 low at 4,223 and the current 2016 yearly low at 4,065. These values are currently acting as points of price support for the Index and any decline below these values would point to a strong down trend developing on the creation of a series of lower lows.

Alternatively, in the event of a false breakout, traders will look for prices to close back above the previously mentioned trendline. In this scenario, price action would be forming a long wick on the daily graph, while suggesting that traders may be looking to accumulate the CAC40 on dips. With any bullish turn in price, traders should monitor current daily resistance near 4,400. Price has been rejected at this point in both of the last two trading periods. A breakout above this value would suggest a return to bullish market conditions.

SSI (Speculative Sentiment Index) for the CAC40 (Ticker FRA40) is currently reading at +1.70. While this number is not yet extreme, it is worth mentioning that sentiment is now reading higher than the value reported in last week’s article. As long positioning increases, traders using SSI can take this as a contrarian signal to look for further declines on the Index.

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