What’s inside:
- DAX possible RST forming at April ’16 trend-line
- CAC 40 working on a weekly/monthly close above trend-line extending down from the 2000 peak
- Important levels outlined
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On Monday, we discussed the DAX and CAC and how they were in the process of negating bearish price sequences, and that the price swings this month were taking on the form of a consolidation making the market look more bull than bear. Both indices subsequently broke out to new highs; Bulls 1, Bears 0.
The DAX is trading at the underbelly of two trend-lines (April ‘16/December), which given the confluence may present as problematic. However, they aren’t considered major resistance given they are running in the same direction as the market. Unless…
We also have a price sequence at hand which could lead to a sharp move in either direction. A reverse symmetrical triangle (RST) or ‘megaphone’ pattern is in the works. These can be reversal or continuation patterns. The increasing price swings of higher highs and lower lows which make up the expanding triangle indicate growing indecision in the marketplace. If it is to resolve itself to the upside a pullback is likely first, then a hold of that dip and up we go. If it is to become a top, the initial down-move may start to turn back higher only to fail below any short-term swing-low which is formed. Or, the market may all-together not even bother with pulling back, but if it does then we’ll be watching for the beforementioned price action for indications as to what the pattern may portend.
On further strength, there is a trend-line running higher from August to watch around 12300, but the big level to keep an eye on is the 2015 record high of 12391. Near-term support comes in at the prior peak of 12156.
DAX: Daily
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Despite its correlation to the DAX, the CAC isn’t carving out the same RST pattern. But it could be doing something which is even more interesting. It’s early, with still the rest of today and tomorrow before the week and month are in the books, but a strong weekly/monthly close above the trend-line running down from the 2000 highs could be a rather significant event. If the CAC is to rip on a big breakout, then the DAX isn’t going to get left behind, only perhaps in magnitude. On a confirmed breakout, the first notable levels of resistance arrive at 5217 and then 5283.
CAC40: Monthly
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---Written by Paul Robinson, Market Analyst
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