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Jason Sen

European stock markets hold longer-term support perfectly

Jason Sen

In last week’s DAX 30 report we discussed the hugely important 14-month trendline (and neckline to the head-and-shoulders) support at 11560/540. I wrote: ‘This is absolutely key to direction into the end of the week. Long positions need stops below the 200-week moving average at 11420/400.’

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Admittedly this was a little tricky because prices overstretched a little on the downside reaching a low of 11383. However, as you can see in the weekly chart above, those that held their nerve have seen a strong bounce this week. We are now well above the 14-month trendline support after a strong performance on Monday and Tuesday.

DAX December futures are now testing the first important resistance for the recovery at 11800/820. This is of course the main challenge for bulls today. Short positions need stops above the September low at 11860. If we continue higher look for 11900/920 and 11980/999, perhaps as far as resistance at 12050/070 into the end of the week.

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There is certainly a good chance we’ll fail to beat strong resistance at 11800/820 on the first test today. We may need to take a couple of steps back and have another run at it tomorrow. The first downside target and minor support is at 11710/11690. Losses are expected to be limited but below here look for strong support at 11650/630.

Euro Stoxx recovery targets

For the Euro Stoxx 50 report I wrote about the important low for 2018 at 3182/72. This area also happened to be an 18-year trendline (joining the 2000 and 2007 peaks), offering support down to 3160. The 3180/60 area did the job of supporting prices perfectly as we bottomed exactly here, clearly demonstrated in the monthly chart below.

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The 100-tick recovery this week has seen Euro Stoxx December futures reach first resistance at 3260/70. This is obviously the key to direction today. Short positions need stops above 3280 but a break higher is a buy signal targeting 3301/03, then a selling opportunity at 3315/25, with stops above 3335.

Failure to beat strong resistance at 3260/70 (as is likely on the first test this morning) targets 3245, perhaps as far as support at 3232/28. A move below 3220 risks a slide to 3205/3195 with key 18-year trendline support at 3165/55 for another buying opportunity. Below here meets good support at 3100/3080 from the price action from March to November 2016, also the 200-month moving average.

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Focus on FTSE

The FTSE 100, which I did not cover last week, also held very important support where the longer-term 38.2% Fibonacci at 6955 sat just above the 200-week moving average and equally important 11-month trendline at 6920/6890, as you can see in the chart below.

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With such important support levels being tested in all three stock markets at the same time, it was not a huge surprise to see buyers motivated and looking for bargains.

However the FTSE December futures recovery has been less spectacular, only reaching 7068 as I write, for a bounce of less than 200 points. The FTSE must beat resistance at 7030/40 for a buy signal today. This would target 7085/90 with a selling opportunity at the 23.6% Fibonacci resistance at 7125/35. Short positions need stops above 7150.

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A break higher targets 7180/90. Above 7205 look for minor resistance at 7220/25, then a selling opportunity at 7265/75. Failure to beat 7030/40 risks a slide to minor support at 7015 before good support at 6985/80.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit InterTrader

The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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