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Saturday, June 14, 2014

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jun 13, ‘14

CAC 40 Index Chart (France)

CAC_Jun1314

The 6 months daily bar chart pattern of CAC 40 rose to touch a new high just short of the 4600 level on Jun 10, but formed a ‘doji’ pattern (in candlestick parlance) that indicates indecision among bulls and bears.

The index corrected during the last three days of the week, dropping below its 20 day EMA intra-day on Jun 13, but recovering to close above all three EMAs. However, the index lost about 38 points (0.8%) on a weekly basis.

Can the index correct some more? It appears so. Technical indicators are in bullish zones, but showing downward momentum. MACD has moved down to touch its signal line in positive zone. RSI faced resistance from the edge of its overbought zone, and is falling towards its 50% level. Slow stochastic formed a ‘double-top’ reversal pattern inside its overbought zone, and has dropped sharply towards its 50% level.

The zone between 4420-4500 has several previous index tops, and should act as a support zone. The index is in a long-term bull market, so the dip can be used to add. But don’t forget to maintain a stop-loss.

DAX Index Chart (Germany)

DAX_Jun1314

The 6 months daily bar chart pattern of DAX touched a new high of 10034 on Jun 10, but could not sustain itself in the rarefied atmosphere above the 10000 level. Three days of correction took the index below its 20 day EMA on intra-day basis. However, the weekly close was above the 9900 level – about 74 points (0.7%) lower than the previous week.

Technical indicators are suggesting that the correction may not be over. MACD has crossed below its signal line in positive territory. RSI is falling towards its 50% level. Slow stochastic formed a ‘double-top’ reversal pattern inside its overbought zone, and has dropped sharply towards its 50% level. Both MACD and Slow stochastic are showing negative divergences by failing to touch new highs with the index.

The zone between 9600-9800 has several previous index tops, and should act as a support zone. The index is in a long-term bull market, which means dips provide adding opportunities.

RTS Index Chart (Russia)

RTSI_Jun1314

The 6 months daily bar chart pattern of RTSI formed a ‘double-bottom’ reversal pattern during March and April ‘14 that seems to have ended the bear market. The subsequent rally has taken the index above its three EMAs into bullish territory.

However, it may be too early for the bulls to start celebrations. The 50 day EMA is well below the 200 day EMA. Only a ‘golden cross’ of the 50 day EMA above the 200 day EMA will technically confirm a bull market.

There are other concerns as well. The index has touched a 4 months high, but all three technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index. A correction is likely.

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