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Sunday, April 11, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Apr 9, '10

FTSE 100 index chart

FTSE_Apr0910

Last week, the FTSE 100 index chart pattern had come close but didn't breach the 5768 level (the 3% 'whipsaw' leeway above the Jan '10 high of 5600). That was the last straw for the bears.

The long Easter break gave the bulls renewed impetus that helped the index close above the 5768 level on Tuesday, and again on Friday - for a sixth straight weekly higher close. The bears might as well start looking for greener pastures.

All three EMAs are moving up with the index above them. But the volumes haven't been worth writing home about. The slow stochastic is hovering just below the overbought zone. The MACD is positive and touching the signal line.

The RSI has dipped after touching the overbought zone. The MFI has drifted down a bit. Note that the new high of 5790 touched on Tuesday, Apr 6 '10 was not accompanied by new highs on any of the technical indicators.

The negative divergence, combined with low volumes and the widening distance between the 50 day and 200 day EMA may be signalling a healthier correction in the near future.

DAX index chart

DAX_Apr0910

A mild correction slowed the upward momentum of the DAX index chart pattern, but by the end of the week the index managed a slightly higher weekly close on reasonable volumes. The low for the week was 6138 on Thursday - which was higher than the Jan '10 top of 6094. The previous top acting as a support is a bullish sign.

All three EMAs are moving up with the index above them. The slow stochastic is at the edge of the overbought zone. The MACD dropped a little, but remains positive and is touching the signal line. The RSI has slipped down from the overbought region. The MFI dropped to the 50% level, only to bounce up.

CAC 40 index chart

CAC_Apr0910

The CAC 40 index chart pattern continues to lag its European neighbours as Tuesday's high of 4065 fell short of the Jan '10 high of 4088. Going past the previous top is imperative before the bulls can fully regain control.

The short correction during the week saw the index take support from the 20 day EMA. All three EMAs are moving up nicely on decent volumes. The slow stochastic is just below the overbought zone. The RSI has dropped towards the 50% level after touching the overbought zone. The MACD is positive and touching the signal line. The MFI is the weak link as it failed to climb above the 50% level.

Bottomline? The chart patterns of the European indices are looking less overbought, thanks to the slight correction during the holiday shortened week. Stay invested, maintain trailing stop-losses and buy selectively. But keep in mind that this bull rally has continued for more than a year.

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