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Levels to watch: FTSE, DAX and Dow

Short-term weakness looks unlikely to last, with retracements across the FTSE, DAX and Dow pointing towards another break higher.

All trading involves risk. Losses can exceed deposits.
Wall Street
Source: Bloomberg

FTSE sell-off could provide long opportunity

The FTSE continues to move lower, following on from yesterday’s inability to sustain price above the previous peak of 7314. With a very substantial support zone below, at 7251-7260, there is a good chance this current weakness will resolve into another break higher soon.

As such, any pullback towards the 7268 region looks like a good opportunity for longs, with a break below the 7251 level negating that bullish short-term sentiment.

DAX retracement likely to be fleeting

The DAX pulled back and bounced upwards from the 76.4% retracement on Friday. With the temporary break through 11,848, we have seen some weakness coming into play this morning.

However, the price is now starting to regain ground, in what apppears to be a sign that we could be looking at another leg higher for the index. Ordinarily a break through 11,861 would provide a renewed bullish signal. But with the key 11,893 resistance in close proximity, it is worth being wary until we see a break through that key resistance level. 

Dow consolidation expected to lead to bullish break

The Dow has been trading in a shallow falling wedge pattern, following on from an incredible uptrend over recent months. Given the overwhelmingly bullish trend, we are looking for longs once more.

On this occasion, it seems unlikely we will see a sufficient retracement to hit the 70% or 76.4%. Should we see a shallow retracement, the bullish signal comes with an hourly close above 20,690. A break back below 20,527 would negate this bullish view.

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