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FTSE 100, DAX and Dow break down through key support levels

FTSE 100, DAX and Dow are on the slide, with the potential for a wider pullback in play after declines through key support levels.

FTSE 100 breaks back down below 7240 support

The FTSE 100 has seen heightened volatility of late, with a bullish push through 7389 being followed up with a bearish break back down below 7240. That support level represents the neckline on a head and shoulders formation, signaling the potential for a breakdown from here.

The textbook method to generate a target from such a pattern points toward a possible decline into 7049. However, it also makes sense to look at the 61.8%-76.4% Fibonacci zone (7167-7104) as a potential target zone if we are to ultimately trend higher. Thus, further downside looks likely before long, with a rise back through the 7277 level required to take some of the bearish pressure off the market.

DAX breaks below key support

The DAX has similarly provided markets with contrasting signals, after yesterday's rally through 13,303 proved to be a false dawn.

Instead, we have since seen the price drop below the 13,142 level to bring about a more bearish outlook for the index. From here there is a good chance that we begin to retrace some of the upside seen throughout much of October. As such, further downside seems likely, with a rise through the 13,183 level required to bring some calm to this market.

Dow declines into confluence of trendline support

The Dow Jones has similarly been on the slide, with the price having lost ground since Tuesday’s peak.

However, we have since seen the price fall into a confluence of two ascending trendlines, pointing towards the possibility that the bullish case may not be over quite yet. As such, watch for how this market responds to this support zone, with a break below 27,672 bringing about a more confident bearish reversal signal.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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