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.

FTSE 100 chart

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.

DAX chart

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.

Dow Jones chart

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