Technical Analyst, Saxo Bank
Summary: DAX, AEX and CAC40 seems to be heavy testing key supports. BEL20 still holding up. FTSE 100 could seems strong and could test all-time highs. FTSE 250 in falling channel but indicators point to bullish break out. But will it?
DAX got rejected at the previous support at 14,149 last week (now a resistance level) and seems set for lower levels. Strong support at around 13,564 is likely to be tested withing the next week or so.
However, RSI hasn’t yet broken below 40 threshold i.e., still showing positive sentiment. If DAX manages to close above 14,160 we would be likely to see a move towards 14,500 possibly also December highs.
Look out for a move below last weeks lows 13,791. If that occurs RSI is likely to break below 40 supporting the bearish trend.
AEX25 is in a bearish trend after closing below 715 last week. Bouncing from around the 0.382 selling seems to be picking up. RSI still above 40 however, but a close below is likely to fuel further selling. A close below 690 on AEX will confirm the bearish outlook with no strong support until around 661-654.
For AEX to reverse the bearish picture a close above 715 is needed.
BEL20 seems indecisive. The index broke support at 3,670 only to jump back above but has so far failed to resume uptrend by breaking above 3,777 which is needed for further upside.
If BEL20 closes back below support at 3,670 followed by new low below 3,631 BEL20 is likely to experience a sell off down to 3,569 possibly 3,497.
RSI indicator is still showing positive sentiment but there is divergence indicating the uptrend has weakened.
CAC40 bounced from 55 daily SMA last week but is in a bear trend supported by negative RSI. RSI closed below 40 16th December. The support at around 6,363 could prove not be that strong if tested. If that scenario plays out a sell off down to around 6,200 should be expected. For CAC40 to reverse to uptrend a close above 6,615 is needed.
FTSE 100 bounced strongly from 7,300 after breaking support at 7,423. FTSE seems likely to resume uptrend. RSI is not showing divergence and if RSI closes back above 40 it could be a good indicator FTSE 100 will test previous highs at around 7,600 potentially take it out for at move to all-time highs at 7,687.
However, a possible scenario is that FTSE 100 could be caught in a range between 7,300 and 7,578. Break out is needed for direction.
FTSE 250 is in a downtrend and seems for trade in a falling channel pattern. Support at 18,493 seems to hold for now. If FTSE250 breaks above its show term falling trendline a move to November highs at around 19,615 could be seen.
No divergence on RS and still showing positive sentiment indicates we could see a bullish breakout of the falling channel.
However, a close below 18,422 is likely to push the Index to next support at around 17,822.
RSI divergence explained: When price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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