Levels to watch: FTSE, DAX and Dow

An early bounce in indices brings resistance into sight

A chart in front of two people
Source: Bloomberg

FTSE 100 bounce hits the buffers

Thursday’s rise upon trendline support provided a new bullish outlook for the FTSE 100 as we continue to trade within the boundaries of an ascending channel formation dating back to December 2014.

Friday’s doji candle shows indecision, and as such the selling seen early in the session has now come into support resulting in a bounce higher. While I am bullish for a return to 7065 this week, I could see some consolidation to match the moves seen last week, and thus it is likely we will see some choppy sideways price action today to consolidate the move higher so far.

DAX spike sees channel boundary in sight

The DAX has been trading within a descending channel over the past month. The price action over the last two weekly candles has seen support provided by the 20-week simple moving average (SMA), and this would likely restrain any further moves lower should they occur. However, with a break above the 20- and 50-period simple moving average (four-hour) which has been providing resistance throughout the night, it seems like we are destined for the month-long descending trendline resistance. With that in mind, I expect this upside to be short-lived, with a break lower from the 11,618 region.

That being said, I am bullish in the long term and when we do see a break from this channel, I would expect it to be to the upside.

Dow Jones respecting March highs following breakout

One of the reasons that formations such as triangles are less reliable for a breakout is that once a breakout has occurred, you still have the resistance or support provided by the peaks within that pattern to contend with. Thus should there not be sufficient momentum, you may see the price remain within the range of that triangle’s peaks. We have seen this perfectly in the Dow, where the price broke higher, only to come into resistance at the 23 March peak (18,208) and then the 2 March peak (18,284).

Today has seen a bounce on those levels, and the bounce seen this morning has only served to bring it back to the highest level in this channel. As such, my bias will be determined by the breakout from the current range (18,208-18,284), and until that happens I expect to see sideways price action dominate, with short intraday momentum indicators, such as the stochastic, used to capture those short-term moves.

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