Levels to watch: FTSE, DAX and Dow

Weakness across both European and US indices this morning looks to provide a buying opportunity with strong risk-to-reward properties.

German stock exchange
Source: Bloomberg

FTSE pullback looks to provide bullish outcome

The FTSE has been drifting lower this morning, with the price falling into the 76.4% retracement. We have been seeing signs of a resurgence for the market over recent days and, as such, the current pullback could be another deep retracement before we move higher once more.

With that in mind, as long as the price does not break below 7397, then further gains seem likely to be around the corner.

FTSE price chart

Deep DAX retracement could bring bullish reversal

The DAX has similarly pulled back to the 76.4% retracement, coming off the back of a bullish break through 12,807 yesterday. Give the wider uptrend, and yesterday’s move higher, there is reason to believe we will push higher from here.

Given that a break higher would not only look for 12,841, but also 12,952 for a continuation of this trend, we could be looking at a near five-to-one risk-to-reward profile here. With that in mind, longs are preferred, with a break below 12,674 required to negate this bullish view.

DAX chart

Dow falling back after sharp rally

The Dow Jones is similarly pulling back this morning, but we have not seen the same kind of retracement yet. Yesterday looked like a clear bullish breakout in the direction of the prevailing trend, and thus this current weakness looks like a good buying opportunity rather than something to worry about.

As such, longs are preferred unless we break below 21,330. Given that trendline support is currently below the 76.4% level (21,371), there is reason to believe we could get another move lower into that Fib before the market turns higher once more.

Dow Jones chart

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