Levels to watch: FTSE, DAX and Dow

The FTSE and DAX return to top end of their respective wedges and begin to selloff. Yet will this mark a short-term top?

A candlestick chart
Source: Bloomberg

FTSE breaking higher

FTSE is punching higher from an early morning consolidation which pulled back to the inside trendline originating from Thursday. The initial spike has been sold into, yet further is clearly possible if trendline support holds. Should it hold once more, we would be looking at the resistance levels of 6429, 6460 and 6489. Also watch out for potential trendline resistance. However, with the FTSE trading within a rising wedge (bearish) there is a chance we could see the FTSE start to move towards the lower boundary of the formation. A close below 6383 would point towards possible downside towards 6368 and trendline support.

DAX hits trendline resistance

The DAX is selling off sharply from trendline resistance dating back to late October. Despite this deterioration, it is clear that we remain within an uptrend, and as such we would need to see a close below 11,337 before this looks anything like a reversal. Thus a bullish outlook remains for now. Resistance levels of note are at 11,433, 11,448 and 11,584. While support levels are at 11,337 and 11,250. Bear in mind that a rising wedge is a bearish pattern, therefore when we do see a breakout, it seems more likely that it will be to the downside.

Dow turning lower?

The Dow Jones saw a strong rally throughout the overnight session, yet we are now seeing the chart start to turn over, with the peak marked by a doji candle. Obviously we are only seeing very tentative signs, yet this is supported by the stochastic and MACD indicators which are both looking increasingly bearish. Also, with the price continuing to form lower highs and lows, we would need to see a close back above 17,862 for the bullish outlook to return. Otherwise, support levels of 17,750 and 17,720 are key.

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