CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

Levels to watch: FTSE, DAX and Dow

Big bounce higher increases the chances that we are seeing a market bottom out, yet the DAX wedge is a worry.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Frankfurt stock exchange
Source: Bloomberg

FTSE bounce reaches major support

The FTSE has seen a strong move higher overnight, following a similar move in the US indices. However, we have once again reached the crucial resistance level of 6123, which represents the December 2014 low. Given that the previous bounce on Tuesday failed to fully touch this level, this marginally counts as a new high, and thus it would still look relatively bullish as long as any selloff remains above 5940. Any downside would have to contend with the 6070 mark first, and I believe this 6070-6123 zone will dictate the state of play for the day. A move below 6070 would likely take us to 6023 and the ascending trendline.

As things stand, we appear to be trending within a rising wedge or ascending triangle, which will be dictated as time goes on. An ascending wedge in a downtrend is bearish whereas an ascending triangle is bullish, and thus the possible respect of this upper ascending trendline will be key should we see a breakout higher.

Ultimately, I expect a break below 6070 to point towards a move to 6023, whereas a move above 6123 would look towards the 6200 mark.

Rising wedge could lead to further losses in DAX

The DAX continues to rise this morning, with the price trading within a rising wedge formation. However, as mentioned previously, a rising wedge in a downtrend typically represents a retracement rather than a bottom, which would point towards a resumption of the downtrend before long.

The current candle has touched the upper threshold of this formation, and thus I expect to see selling come back to the fore. Given that we are approaching the apex of this formation, there is little downside allowed to remain within this pattern, with the lower support threshold currently at 10,083.

While we continue to create higher highs, I would say that upside would not be surprising, but I would need to see a breakout from this pattern (above 10,314) to gain confidence of further upside. Otherwise, watch the stochastic, as the wedge is replicated in that pattern, and a break lower in the stochastic could hint to a possible replication in price action.

I would favour a breakout lower from this formation, yet I would need to see a move below 9918 to gain confidence of another strong selloff. For now I am simply watching for a move back towards 10,105 to continue this pattern.

Dow breaking above key resistance level

The Dow Jones is continuing its stellar performance seen in the US session, with the price now pushing above the 16,374 resistance level. This is certainly a bullish move and could possibly point towards a bullish resolution to the FTSE and DAX positions. However for now, I would simply say that any pull back to 16,374 would likely form new support, and until the price moves below 16,250, I expect further upside towards the 16,548 and 16,619 region.  

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.