DAX & CAC Technical Analysis: Consolidation Patterns to Lead Higher
- DAX consolidation in record territory should lead to test of long-term top-side trend-lines
- CAC undergoing period of digestion, should resolve towards the May highs or better
- Bullish in the immediate future, but want to be careful on extension into key levels/lines
Find out what’s driving Global Equity Markets in our Q4 Forecast.
Last week, when discussing the DAX, we were cautiously bullish as the market continues to trade higher but is currently over-extended, and more importantly, facing a test of long-term top-side trend-lines on another push higher from here. The week-long consolidation in record territory suggests we will soon see a resolution higher. Support is close at hand by way of the late-August to current trend-line.
However, from just over 13k to 13.1k lies a pair of long-term trend-lines (2000-2015, 2015-2017). They are indeed long-term in nature, especially the former, but still could be quite relevant, even if just for a short period of time. We’ll be paying close attention to how price action plays out at those lines for clues on what to expect next. A breakout from the recent range may prove to only be temporary before a correction sets in.
Along with the DAX, the CAC has been undergoing a period of consolidation and is set to resolve to the upside. While the German index has potential cappers not far ahead, the French market has a little room to run before finding resistance by way of the May high at 5442. It’s a significant high not only because a breakout above would mean new multi-year highs, but an important event marked the end of the rally up to that point – the French elections. As long as the current consolidation doesn’t turn into a sharp slide lower, then the targeted objective is the May high at the least.
Check out this new guide on trading psychology – Building Confidence in Trading
---Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.