Levels to watch: FTSE, DAX and Dow

Indices consolidate and retrace following a major move higher this week. Considering the existence of a long weekend and Janet Yellen’s speech, we could see traders hold off. Nevertheless, the outlook remains bullish for now.

Joshua Mahony
Market Analyst, London

2016-05-27T10:01:22+0100

Data board

Source: Bloomberg

FTSE continues to consolidate after rally
The index has been trading largely sideways since breaking through the major 6237 resistance on Tuesday. Given that rally and the fact that we are only seeing a sideways range rather than any selling pressure, it seems likely we will break higher once more upon exiting this formation.

As such, it makes sense to either be long around the bottom of this pattern (6249 for example), or else await the breakout for above 6281 resistance. Above 6281, key resistance levels are around 6324 and 6337. Conversely, should we see a break below 6237, this could spark a major leg lower, with 6217 the next support level of note.

FTSE daily chart

FTSE daily chart

FTSE daily chart

DAX pulls back from trendline resistance
The index is turning lower this morning, following a move into a key trendline dating back to December 2015. Despite this, we have not seen any signs to say that this current rally is over and thus this move is viewed as a retracement of yesterday’s rally.

With that in mind, it is worth looking out for potential support around 10,233 (61.8%) and 10,211 (76.4%). The bullish outlook would be negated with an hourly close below 10,176.

DAX daily chart

DAX daily chart

DAX daily chart

Dow retracing after break out of downtrend
The index has been gradually moving lower over the past two days. Considering the break through 17,761 and the shallow nature of this pullback, another rally appears to be the likeliest event from here. There is a potential triangle pattern being formed, yet ultimately, we will await a break through 17,894 for a bullish signal, given that we have no Fibonacci retracement to look out for.

As such, a bullish view is in play, yet the entry to such a move is perhaps not as simple as some other markets. Key resistance is found at 17,894, 17,933 and 17,978. Meanwhile, the most notable support level to watch is 17,761.

Dow daily chart

Dow daily chart

Dow daily chart

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