Amazon deals

Saturday, August 9, 2014

Stock Index Chart Patterns: CAC 40, DAX, RTS – Aug 08, ‘14

CAC 40 Index Chart (France)

CAC_Aug0814

The 6 months daily bar chart pattern of CAC 40 is trying to survive in bull territory on hope and a prayer. The following comments appeared in last week’s analysis: “The positive divergences (in technical indicators) can cause an upward bounce. The likely bounce can be a pullback towards the 4275 level, in which case, it would be a selling opportunity.”

On the first 2 days of the week, the index had a mild pullback to the 4250 level. Bears promptly started selling. The index dropped below the 4125 level intra-day but managed to close just above the 4147 level. Does the 4147 level have any technical significance? The answer is: Yes. (Read last week’s post to find out why.)

The 20 day EMA has crossed below the 200 day EMA, which is bearish in the short-term. The 50 day EMA is falling rapidly towards the 200 day EMA; a cross below will technically confirm a bear market. But that confirmation is still awaited.

Daily technical indicators are looking bearish and oversold. MACD and Slow stochastic are well inside their respective oversold zones. RSI is showing some resilience by not entering its oversold zone. Both RSI and Slow stochastic are showing positive divergences by not falling lower with the index.

An upward bounce is possible. The index has corrected almost 11% from its Jun 10 peak (of 4599) to Friday’s intra-day low (of 4109). Some more correction can not be ruled out.

On longer term weekly chart (not shown), the index has closed below its 50 week EMA for the 2nd week in a row, but is trading above its rising 200 week EMA. Weekly technical indicators are in bearish zones. A fall below the 4100 level can test of support from the 200 week EMA (currently at 3936).

DAX Index Chart (Germany)

DAX_Aug0814

The following comments in last week’s analysis of the 6 months daily bar chart pattern of DAX may sound prophetic, but was actually the result of an educated guess: “Can the index fall even more? The answer is: Yes.”

The index dropped to an intra-day low of 8903 on Fri. Aug 8 (lower than its Mar 14 low of 8913) but managed to close above the 9000 level. From its Jun ‘14 top of 10051, the index has corrected more than 11% so far.

All three daily technical indicators are inside their oversold zones. An upward bounce is possible at any time. Note that an index (or stock) can remain oversold for long periods – but that typically happens in a bear market. Technically, the index hasn’t entered a bear market yet.

On longer term weekly chart (not shown), the index closed below its 50 week EMA for the 2nd straight week, but is trading well above its rising 200 week EMA. A fall below 9000 can test support from the zone between 8000-8500.

RTS Index Chart (Russia)

RTSI_Aug0814

Last week’s analysis of the 6 months daily bar chart pattern of RTSI had the following remarks: “Of the three indicators, Slow stochastic is inside its oversold zone. MACD and RSI have not yet entered their respective oversold zones. That means, further downside can’t be ruled out.”

As expected, the index dropped lower to about 1135 but bounced up on the last day of the week to close just below 1175. Though daily technical indicators are inside their oversold zones, all three touched lower bottoms (than their Apr ‘14 lows) while the index touched a higher bottom.

The combined negative divergences will encourage bears to remain active. All attempts at pullbacks are encountering selling pressure.

On longer term weekly chart (not shown), the index is trading below its three weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones, but not looking oversold yet. The down move is likely to continue.

No comments: