DAX 30/CAC 40 Technical Highlights
- DAX reversal yesterday suggests (only) a bounce
- CAC 40 lifting off 200-day, but H&S pattern in effect
DAX reversal yesterday suggests (only) a bounce
The DAX 30 gapped down to start the week but posted a relatively powerful reversal from just above the 200-day to end yesterday. This morning brought with it another, smaller gap which has currently closed. The price action is a positive in the near-term.
There will likely be some opposition in the 11850-area, where several lows resulted after the April 3 gap higher. This resistance extends up to a full gap-fill on Friday up to 11902. This may be all the higher the market can rally before rolling back over.
If a rejection doesn’t develop in the 11850/900-zone, then watch the May 28 gap at 12027 and declining upper parallel off the May 3 high as the next levels of resistance. Over the past month the trend structure has turned negative with a lower-low and lower-high sequence having developed.
Following a break of the trend-line from the December low this could mean we are seeing the beginning of a trend lower in the weeks ahead.
DAX Daily Chart (Resistance ahead to pay attention to)
CAC 40 lifting off 200-day, but H&S pattern in effect
The CAC 40 gapped just below the 200-day MA yesterday before posting a solid rebound to erase most of the day’s losses. This has the near-term picture constructive, but with the head-and-shoulders (H&S) pattern just recently triggered, downside momentum may have only begun.
Watch how the market reacts on a retest of the neckline around 5275, where also lies the trend-line from five weeks ago. The CAC could make a run above the aforementioned resistance and close the May 28 gap at 5312 before turning lower. At this time, it will require a sustained push well above the neckline to negate the H&S pattern’s negative bias.
CAC Daily Chart (between 200-day/resistance)
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—Written by Paul Robinson, Market Analyst
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