Levels to watch: FTSE, DAX and Dow

Yesterday’s upside likely to mark a bottom for indices as the selling of recent weeks becomes a distant memory.

Data on screen
Source: Bloomberg

Bullish engulfing highlights a likely reversal for FTSE

Yersterday saw the 38.2% Fibonacci support hold as the bullish signals across many of the markets held up to push markets into a new move high. The MACD histogram bottom, coupled with yesterday’s cross on the stochastic in an oversold region, points to a period of upside to come.

However, I would be aware of the signs that possibly indicate we may have seen the beginning of a more protracted move lower. The trendline breaks, accompanied by a failure to create a new higher high and higher low means that this bounce could fall short of the 7065 mark. Thus I am bullish and see the major support for the FTSE 100 coming in at 6808, yet any upside could see sellers come in at the 20/100-day SMA confluence or the 50-day SMA and 6975 resistance zone.

Triangle support holds as DAX bounce points to further upside

Yesterday’s bounce on the DAX came following the hammer formation on Tuesday which saw a bottom at the 38.2% Fibonacci retracement. The marabuzo candle yesterday was a big bullish signal of intent and now brings us back to the ascending trendline dating back to October 2014.

The turning MACD histogram and stochastic points to a further move higher and this is likely to return us back towards the upper end of this descending channel. However, I would be aware of the near-term trendline resistance and 23.6% retracement (11,448). Nevertheless, I do see this as a more positive period for the DAX and as such I expect to see further upside for now.

Dow at major resistance following morning star reversal

Yesterday’s strong marabuzo candle makes the downside of the past few weeks seem a distant memory, regaining approximately 50% of that downturn at one point. In a similar fashion to the DAX and FTSE, we are looking at oversold stochastics and a turning MACD histogram, which points to a move higher to come.

However, the price is currently at a key resistance zone, at the apex of the triangle which is accompanied by the 50-day SMA. Thus I am bullish, yet would see a move above 18,040 for the Dow Jones as crucial to the next leg higher towards 18,208.

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