Technical Analyst, Saxo Bank Group
The EuroStoxx50 Index closed Thursday below the support level at around 4,976, suggesting a possible confirmation of a corrective downtrend.
However, today's bounce indicates the potential for this to be a false break. If the Index closes above 5,053 and the RSI closes back above the 60 threshold, it would support a scenario where the recent break was misleading and an uptrend might resume.
Despite the positive signals, the bearish engulfing top and reversal pattern remains intact and a concern. This pattern will stay valid until there is a daily close above 5,122. A close above 5,053 would be a strong indication that the top and reversal pattern wiill be challenged, suggesting a potential shift in momentum.
Should the EuroStoxx50 Index drop again and close below 4,976, it is likely to trigger a sell-off towards the support level at around 4,888.
Yesterday, the DAX tested the lower rising trendline and key support at around 17,900 but managed to close above it. With today's bounce, the DAX could resume its uptrend. The RSI is still exhibiting positive sentiment with no divergence. Combined with a potential close above its falling trendline, this is indicating that the DAX could resume its uptrend.
If the DAX closes above 18,326 and the RSI closes above the 60 threshold, this scenario will be confirmed.
Should the DAX close below 17,900, the rebounding scenario is likely to be demolished, with the DAX likely to sell-off down to 17,620
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