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Levels to watch: FTSE 100, DAX and Dow

The indices are showing signs of a potential bullish reversal, with the DAX leading the way higher.

IG Analyst

Publication date : 2018-07-05T09:25:00+0100

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FTSE 100 showing signs of bottoming out

The FTSE 100 is moving higher this morning, following a pullback into the same 7543 lows seen around 19-21 June.

This respect of the previous support levels highlights the potential for a complex inverse head and shoulders formation to come into play, with a break above 7706 providing that bullish confirmation. Until that happens, watch for a rally above 7632 as a bullish signal for the short term. A move back below the 7540 support level would start to throw this emerging bullish picture into doubt.

FTSE 100 price chart

FTSE 100 price chart

FTSE 100 price chart

DAX completes bottom after bullish breakout

The DAX has managed to rally through the 12,430 resistance level this morning, providing a bullish short-term picture. The creation of higher lows meant that a break above the recent swing high would complete that inverted bottoming pattern.

Now that we have seen this rally, further upside seems likely, with downside seen as an opportunity to get long. A move back below 12,283 would provide question marks over the validity of this bottom. Watch out for the 76.4% Fibonacci resistance at 12,487. However, a break above there, and particularly 12,606, would provide greater confidence that we are set for a protracted move higher.

DAX price chart

DAX price chart

DAX price chart

Dow triangle could lead to bullish reversal

The Dow Jones continues to consolidate off the back of a sell-off into the 76.4% retracement at 23,977 last week. The creation of higher lows and lower highs points towards a triangle formation, where the breakout will provide us with the signal of where we go from here.

With the price heading higher from the lower bounds of this pattern, there is a good chance of positive price action today. However, watch for a break above 24,467 as a bullish breakout signal. Conversely, a drop below that 76.4% Fibonacci support level at 23,977 would signify the potential for an extension of the recent breakdown.

Dow Jones price chart

Dow Jones price chart

Dow Jones price chart

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