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Levels to watch: FTSE, DAX and Dow

Mixed fortunes for the indices sees the FTSE at trendline resistance, the DAX with a potential head and shoulders pattern, and the Dow at an interesting range bottom.

IG Analyst

Publication date : 2017-05-10T09:27:42+0100

The City of London

Source: Bloomberg

FTSE uptrend coming into big resistance

The FTSE has been trending higher over recent weeks, with the overnight pullback turning higher from the 50% retracement. However, it is worth noting that we have moved into a crucial resistance area, with the January high of 7359 accompanied by a descending trendline. We must see the index overcome these hurdles for this uptrend to continue.

As such, while the recent uptrend remains intact, a convincing break above 7359 or below 7282 would lead the bias for this market.

FTSE chart

FTSE chart

FTSE chart

DAX back to inside trendline

The DAX has been respecting an inside trendline this morning, as the index threatens to form a bearish head and shoulders formation. For that to come into fruition, we would need to see a break back below 12,704. Thus an hourly close below that level would provide us with a bearish short-term view.

However, until that occurs, we continue to trend upwards in the wake of Monday’s downturn. With that in mind, an hourly close above 12,749 would point towards another round of gains for the index.

DAX chart

DAX chart

DAX chart

Dow at bottom of its range

The Dow Jones has returned to the bottom of its range once more overnight, with the early April peak of 20,888 coming into play. We are confronted with two options here. On one side, the past three weeks of the price action could be a double top formation, pointing towards a retracement of the rally from 20,375. A projected target would take us past the 61.8% retracement of 20,641.

On the other side, we could see this range continue apace, which would call for a bullish turnaround in the near future. Given that an entry at 20,888 with a stop below 20,846 would provide a 3/4-to-1 trade, this could be an interesting value proposition. With that in mind, a bullish outlook is in play unless we break below 20,846.

Dow Jones chart

Dow Jones chart

Dow Jones chart

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