Sunday, March 28, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Mar 26, '10

FTSE 100 index chart


There is only one possible conclusion that can be drawn from the FTSE 100 index chart pattern - it is all over for the bears, bar the shouting. The index made another new high of 5737 before ending the week just above the 5700 mark. A higher weekly close of 53 points.

All three EMAs are moving up, up and away with the FTSE index well above them. The slow stochastic is firmly inside the overbought zone. But the other three technical indicators are showing some signs of weakness that could trigger a correction.

The MACD has stopped rising and is touching the signal line. The RSI has dropped from the overbought zone and failed to make a new high with the index. The MFI also did not make a new high and has dipped a little.

For all the bears out there, who are ready to throw in the towel, here are a few glimmers of hope. To convincingly clear the Jan '10 high of 5600, the 3% leeway for whipsaws have to be applied. That gives a target of 5768, which hasn't been crossed yet.

There is an outside chance of the FTSE 100 developing a bearish head-and-shoulders pattern - with the left shoulder formed in Jan '10. The head is currently being formed, and we will be more certain of the possibility if the index drops below the Jan '10 high of 5600. A fall to the 200 day EMA followed by a bounce upwards will confirm the formation of the head.

In technical analysis there are no certainties, but one should remain aware of the possibilities before plunging in feet first.

DAX index chart


The bulls are back in control as the DAX index chart went past the Jan '10 high of 6094, touched 6140 before closing the week at 6120 - a weekly gain of 38 points.

The slow stochastic remained in the overbought zone. The MACD is rising and is above the signal line. The RSI slipped below the overbought zone before rising back up, but made a lower top. The MFI also made a lower top as it slid down to the 50% level.

All three EMAs are rising and the index is above them. So the bulls have no immediate concerns. The rounding bottom pattern - visible clearly in the 20 day and 50 day EMAs - is a bullish sign.

CAC 40 index chart


The CAC 40 index chart pattern is looking stronger than last week, but has so far failed to go past the Jan '10 high. It managed to edge past the 4000 mark before closing the week at 3989 - 64 points higher for the week and still nearly 100 points below the Jan '10 high.

The slow stochastic is in the overbought zone. The MACD is positive and just above the signal line. The RSI has dropped from the overbought zone and is headed down. The MFI is looking the weakest, as it has slipped below the 50% level.

The three EMAs are moving up with the index above them. It is a matter of time before the index emulates its European neighbours in making a new high.

Bottomline? The chart patterns of the European indices are looking bullish. The negative divergences in the RSI is the only concern. Stay invested with trailing stop-losses and be very selective in buying.

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