DAX/CAC Technical Outlook:
- DAX is now in a face-off with big levels ahead of record highs
- CAC is now trading in open space, could keep playing catch-up
It was an extremely sharp reversal of fortune for the DAX, as it exploded from multi-month lows and negated a triggered head-and-shoulders sequence that was working well. The area around 13350/450 is a formidable one as highs from the summer stand in the way.
The peaks of the previously in play head-and-shoulders pattern make up the ceiling that needs to be crossed if the coronavirus gap at 13579 is to be filled along with a new record high achieved beyond 13795.
With the surge off the recent low having become short-term extended into resistance, perhaps a breather is in order. However, the amount of force that came with the rally may not see to it for long that price stalls before trading higher.
A wait-and-see approach at the moment may be most prudent given proximity to a strong area of resistance, but soon a fresh record high may be order should the DAX trade through summer resistance.
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DAX 30 Daily Chart (momentum may soon push price through resistance)
DAX Chart by TradingView
The CAC was in bad shape compared to the DAX, but now is trying to play catch-up. The rally from the recent low pushed the index through the 5200-area, a big spot. Old resistance becomes a potential point of new support.
A pullback to around 5200 could provide traders with a good risk/reward set-up for fresh long entries. On the top-side it is difficult to find too many barriers standing in the way of the CAC trading higher, giving it more potential perhaps than the DAX to rally – not something we have been able to say for a while now.
CAC 40 Daily Chart (watch 5200-area on pullback for support)
CAC 40 Chart by TradingView
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—Written by Paul Robinson, Market Analyst
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