Saturday, June 21, 2014

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jun 20, ‘14

CAC 40 Index Chart (France)


The 6 months daily bar chart pattern of CAC 40 dropped below its 20 day EMA and closed at 4510 on Mon. Jun 16. The next day, the index touched an intra-day low of 4508 – just above the support zone between 4420-4500 mentioned in last week’s post – but bounced up to close above its 20 day EMA.

The index rose to touch a lower top of 4582 on Thu. Jun 19, and dropped to a marginally lower close for the week. The lower top leaves the door open for a continuation of the corrective move next week.

Technical indicators are in bullish zones, but looking weak. MACD is sliding below its signal line in positive territory. RSI bounced up from its 50% level, but is again falling towards it. Slow stochastic bounced up sharply after dropping below its 50% level, but its upward momentum is stalling.

The index is in a long-term bull market. Corrections provide adding opportunities.

DAX Index Chart (Germany)


The 6 months daily bar chart pattern of DAX has some good news for the bulls and some bad news. First, the good news:

Technical indicators in last week’s chart had suggested a continuation of the correction. Instead, the index took support from its 20 day EMA, and formed a higher bottom and higher top pattern for the week. The index touched a new intra-day high of 10051 on Fri. Jun 20, but closed at the lowest point of the day. However, it gained back its previous week’s loss.

Now, the bad news. The index formed a ‘shooting star’ pattern (in candlestick parlance) supported by highest volumes in 9 months (not shown on chart). The combination of the two can lead to a possible reversal of the up trend. Another pattern visible is a ‘broadening top’ (higher tops, lower bottoms), which has bearish implications.

Technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index. One of the lessons learnt the hard way (i.e. by losing money) is never to short a bull market. However, partial profit booking near a new high may be a prudent move.

RTS Index Chart (Russia)


The 6 months daily bar chart pattern of RTSI traded in bull territory throughout the week (i.e. above its gently rising 200 day EMA), touching an intra-day high of about 1390 on Thu. Jun 19, but closed 16 points lower for the week.

The 20 day EMA has crossed above the 200 day EMA, indicating short-term bullishness. However, though rising, the 50 day EMA is still below the 200 day EMA. So, the technical confirmation of a bull market is still awaited.

Technical indicators are in bullish zones, but showing negative divergences by touching lower tops. The index is likely to undergo some correction or consolidation.

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