Levels to watch: FTSE, DAX and CAC

Indices have rallied hard into the beginning of Monday’s session, although with US markets out of action today has a somewhat unreal quality to it. 

Source: Bloomberg

FTSE 100 could see 5700

The recovery from last week’s lows has been as swift as the similar pattern was in January. Since Thursday’s lows, when bearishness seemed to carry all before it, the index has gained over 300 points.

It has pushed through the key 5789 level, the low from 3 February (and a support zone from 26 January), and now looks to target 5940 and then 6100.

A rising trendline off the lows of last week is providing possible support, and heavily overbought intraday relative strength index and stochastic indicators suggest that we could see a move back to 5700 or even 5650, providing dip buyers with another opportunity. 

DAX could move towards 9250

DAX pessimists have been trounced since Thursday’s low, with the index having posted a 5% rise from its sub-8700 position towards the end of last week.

As a result, it has smashed through the downtrend line that prevailed through the first two weeks of February, and now looks to move on towards 9250, with the area around 9400 the next target.

A move back below the Wednesday peak of 9100 would signal some weakness is in store, but even then it would have to move below 9000 to really suggest that the current rally is a flash in the pan. 

CAC eyes 4000

The French index has put in a good performance too since Thursday’s low, but for now it is stuck below the Wednesday high around 4100.

A move beyond here (and the 200-hour simple moving average at 4103) would signal that targets around 4174 and then 4300 are in prospect.

Any slump would need to break the rising trendline around 4000 to indicate that a retest of last week’s lows is in order.

Should the upward trendline hold, then it will offer a textbook chance to buy the first retracement in a rally that may retake much of the ground lost in the first two weeks of February. 

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