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Saturday, July 19, 2014

Stock Index Chart Patterns: CAC 40, DAX, RTS – Jul 18, ‘14

CAC 40 Index Chart (France)

CAC_Jul1814

The following comments were made in last week’s analysis of the 6 months daily bar chart pattern of CAC 40: “Is the correction over? Negative divergences, still visible on the technical indicators, are suggesting otherwise.”

Though the index closed 19 points higher for the week, it has been consolidating within a 100 points zone between 4275-4375 – possibly forming a bearish ‘flag’ pattern in the process. The likely break out from the ‘flag’ is downwards.

Bears are unlikely to release their strong grip on the chart unless the index crosses convincingly above 4375 and its falling 20 day EMA. Bearish technical indicators are suggesting that may be easier said than done.

MACD is inside its oversold zone, moving sideways below its falling signal line. RSI bounced up from the edge of its oversold zone, but remains below its 50% level. Slow stochastic emerged from its oversold zone, but its upward momentum has stalled well below its 50% level.

All three indicators continue to show negative divergences by falling below their respective Feb ‘14 lows, while the index touched a higher low. A fall below 4275 can drop the index towards 4000.

On longer term weekly chart (not shown), the index is receiving support from its 50 week EMA and is trading above its 50 week and 200 week EMAs in a long-term bull market. However, weekly technical indicators have turned bearish. The support from the 50 week EMA may get breached. Hold with a strict stop-loss at 4275.

DAX Index Chart (Germany)

DAX_Jul1814

More downside was expected in last week’s analysis of the 6 months daily bar chart pattern of DAX due to bearish technical indicators. Instead, the index used the support from the 9600 level to rally briefly past the 9800 level and its 20 day and 50 day EMAs.

The lower top of 9871 – touched on Wed. Jul 16 – gave an excuse for bears to resume their selling. The index dropped below its 20 day and 50 day EMAs into the support zone between 9600-9800. Will the support hold again?

Volumes on Fri. Jul 18 were the highest in 4 weeks as the index opened with a downward gap and dropped below the 9700 level – indicating strong bear dominance. Bulls fought back and the index closed near its highest level with a 54 points gain for the week.

All three daily technical indicators are in bearish zones. Bulls are likely to defend the 9600 level strongly, because a drop below it can take the index much lower towards 9000-9250.

On longer term weekly chart (not shown), the index is continuing to receive support from its 20 week EMA, and is trading above its 50 week and 200 week EMAs in a long-term bull market. However, weekly technical indicators are falling within bullish zones. Hold with a strict stop-loss at 9600.

RTS Index Chart (Russia)

RTSI_Jul1814

The 4 months long bull rally from the Mar ‘14 low on the 6 months daily bar chart pattern of RTSI appears to be over. The following bearish possibility was mentioned in last week’s analysis:

“By touching a slightly lower intra-day top of 1420 on Thu. Jul 10, and forming a ‘reversal day’ pattern (higher high, lower close), the possibility of a ‘double top’ reversal pattern has come to the fore. However, the pattern will get confirmed only if the index falls below the 1350 level.”

The index confirmed the ‘double top’ reversal pattern by falling below 1350 and its 50 day and 200 day EMAs – back into bear country. The stop-loss at 1325 got triggered in the process. The 50 day EMA is about to cross below the 200 day EMA and confirm the return to a bear market.

Technical indicators are looking bearish, and a bit oversold. MACD is falling below its signal line and has dropped inside negative zone. RSI has dropped almost to the edge of its oversold zone. Slow stochastic has entered its oversold zone. Any upward bounce from here is likely to face more selling.

On longer term weekly chart (not shown), the index has dropped below its 20 week and 50 week EMAs after finding resistance from its 200 week EMA. Weekly technical indicators are turning bearish. Stay away for now.

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