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Sunday, March 21, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Mar 19, '10

FTSE 100 index chart

FTSE_Mar1910

The FTSE 100 index chart pattern brushed aside the bearish concerns raised last week and made a new high of 5691, but closed barely 25 points higher on a weekly basis. It also traded within a narrow range of 103 points - between the low of 5588 on Mar 15 '10 and 5691 on Mar 19 '10.

Volumes were significantly higher on Friday, which need not be too favourable for the bulls. Why? Because the index made a new high but closed just above the low of the day. That could well be a sign of buying exhaustion.

All three EMAs are moving up and the FTSE index is well above them. The slow stochastic is inside the overbought zone where it has remained for 3 weeks. The RSI has also entered the overbought zone where it has not spent much time of late and looks like it wants to come down. The MACD is in the positive zone and above the signal line, but it has finished slightly lower than a week ago. The MFI is moving up above the 50% level.

Everything looks favourable for the bull rally to continue, except for the negative divergence in the MACD and the slight sign of weakness in the RSI.

DAX index chart

DAX_Mar1910

The bulls continued to rule as the German DAX index chart came within 50 points of its Jan '10 high of 6094. But the high volume reversal day pattern (of higher high and lower close) formed on Friday keeps the possibility open for a double-top bearish pattern.

All three EMAs are moving up with the index above them. The slow stochastic and the RSI are both in the overbought zone. The MACD is positive and above the signal line. But the MFI has dipped down to the 50% level.

The bulls have continued their party in spite of the slow recovery in the economy, and they are in no mood to give up. But the previous high of Jan '10 needs to be cleared convincingly before the bears throw in the towel.

CAC 40 index chart

CAC_Mar1910

The French CAC 40 index chart pattern is looking a bit weaker than the DAX index as it failed to reach anywhere close to the Jan '10 high of 4088. The reversal day pattern on decent volumes on Friday indicates that the bulls may be running out of steam.

The three EMAs are moving up with the index above them, so the bulls are under no great threat. The slow stochastic is in the overbought zone. The RSI has dipped below the overbought zone and the MFI has dropped to the 50% level. The MACD is positive and above the signal line, but remained flat through the week.

Bottomline? The FTSE 100 index chart has moved above the Jan '10 high, but hasn't done that convincingly yet. The CAC 40 and DAX index charts are still struggling to reach new highs. The reversal day patterns could lead to a possible correction. Any buying should be done with tight trailing stop-losses. Investors may be better off sitting on the sidelines.

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