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Thursday, July 23, 2009

CAC 40 (France) index chart pattern - Jul 22, '09

The last time I looked at the chart pattern of the CAC 40 index was in early April '09. The French index was still in a bear market, way below its 200 day EMA and looking quite weak - even though it had started to rally with the world indices from March '09.

The 6 months closing chart pattern of the CAC 40 index (in blue), with the BSE Sensex index (in red) superimposed for comparison, shows that the French index has not only under-performed the Indian index but it has also failed to enter a bull market:-


The global stock market rally that began in Mar '09 took the CAC 40 index upto the 3400 level. Several efforts to breach that level on the up side was strongly resisted by the 200 day EMA.

The index seemed to get disheartened and gave up its efforts to enter a new bull market. The subsequent correction brought it below its 20 day and 50 day EMAs, and the index made a bearish rounding top formation.

Just when it looked like all was lost for the bulls, note the interesting positive divergence in the RSI that led to a renewed upsurge that began last week. The RSI made a higher bottom while the CAC 40 made a lower one on Jul 10, '09.

But the volumes have started to recede as the index moved higher. The upward momentum has definitely slowed after crossing the 3300 level, and the index is once again facing resistance from its 200 day EMA.

All the technical indicators are supporting the up move. The MACD is marginally positive and above its signal line. The RSI and MFI have moved beyond the 50% levels. The slow stochastic has entered the overbought level.

However, a couple of negative divergences have appeared, and I'm sure observant readers will spot them. If not, ask me and I'll be happy to explain.

Bottomline? The CAC 40 index chart pattern has still not lost its weakness - specially when compared with the BSE Sensex index. It may make another valiant effort to conquer the resistance of the 200 day EMA. Smart investors should book profits.

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