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Sunday, February 7, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Feb 05, '10

FTSE 100 index chart


The concluding remarks after last week's analysis of the European indices were:

'The bulls may attempt a pull back, but bears are unlikely to release their firm grip. Wait for lower levels to enter.'

As if on cue, the FTSE 100 index chart moved up during the first three days of the week before encountering stiff resistance from the falling 20 day EMA.

A 'reversal day' pattern (higher high, lower close) on Wednesday led to a sharp fall on high volumes on the last two days of the week. The 20 day EMA dipped below the falling 50 day EMA. The index is still above the rising 200 day EMA.

The bulls can find some solace from the positive divergence in the RSI, which made a higher low as the FTSE 100 sank to a new low. The other technical indicators continue to look weak.

The slow stochastic is inside the oversold zone. The MACD is below the signal line, and falling in negative territory. The MFI is below the 50% level and just above the oversold zone.

Bears remain in control, as they quickly squashed the feeble pull back attempt of the bulls.

DAX index chart


The pull back attempt by the bulls in the DAX index chart faced a slightly worse fate than in the FTSE 100 index. Strong resistance from a falling 20 day EMA pushed the index down to the 200 day EMA on higher volumes.

The slow stochastic is in the oversold zone. The MACD is below the signal line and falling in negative territory. The MFI is below the 50% level. So is the RSI, which is showing a positive divergence - giving some hope to the bulls.

CAC 40 index chart


The CAC 40 chart is looking the most bearish. The pull back attempt of the bulls was thwarted by the falling 20 day EMA, which has dropped below the 50 day EMA. The index has moved below the 200 day EMA.

The technical indicators are looking just as weak as those of the FTSE 100 and DAX. The fall on high volumes is not good news for the bulls.

Bottomline? The European indices are bearing the brunt of the bad news of the likely sovereign debt default of the PIIGS (Portugal, Ireland, Italy, Greece, Spain). The situation has changed to 'sell on every rise'. Bide your time for lower entry points.

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