DAX 30 & CAC 40 Technical View: Short-term Positive, Broadly Negative


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

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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)

DAX 30 & CAC 40 Technical View: Short-term Positive, Broadly Negative

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)

DAX 30 & CAC 40 Technical View: Short-term Positive, Broadly Negative

Want to learn more about trading the DAX? Check out ‘How to Trade the DAX’, and join me weekly for technical updates in the Indices and Commodities webinar.

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—Written by Paul Robinson, Market Analyst

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