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European stock markets break important longer-term support levels

The DAX 30 future has collapsed from a post-August 2015 recovery high at 11419. We had already seen a sell-off of course last year after the market peaked in March 2015 and suffered a mini-crash in August. In January we tested the August and September lows and managed a good bounce but February has seen us take out that level.

The triangle pattern in the weekly chart above was broken on the downside in mid-January and, after a re-test of that trendline, prices have fallen steeply once again. The last lines of defence for bulls were the 200-week moving average at 9105/00 and the 38.2% Fibonacci support at 9052.
This Fibonacci is measured from the financial crash lows in 2009 so we have now lost of 40% of that six-year bull market in just 11 months as you can see in the weekly chart below.

The only hope bulls have this week is to see a bounce and a weekly close at least above 9050 and preferably above 9105. It is possible we can then count this move as merely a spike lower, not confirmed by a weekly close. However if this is not seen, further moves to the downside are expected of course.
So what are the targets? The first big longer-term price level is the mid-2013 high at 8561 coupled with the longer-term 38.2% Fibonacci support at 8517. This is measured from the 2000-2003 crash low at 2187 up to the 2015 all-time high. Obviously this 45-point band from 8561 to 8517 should be hugely important and it is the next big chance for bulls to mount a defence.

Ideally if you are looking to pick a potential bottom at this level you would need a stop below the 2014 lows at 8350. The next target and support would be the 2007 pre-financial crisis high at 8253/8215.
The Euro Stoxx 50 gives a more negative picture in that the index never managed a recovery as far as the 2007 peak. It has also already collapsed below the 2014 low at 2771 and 50% Fibonacci support (from the 2009 low) at 2765, as well as the various trendline supports you can see in the weekly chart below.

Bulls must force a close on Friday above 2765 for a chance to signal a false intraweek break of the important trendline and 50% Fibonacci support here.
Taking the 2012 low and adding Fibonacci levels we can see there is more minor 61.8% support at 2694 and we are closing in fast on this level. Failure here risks a slide as far as the 2012 double-top highs at 2607.

The FTSE 100 is now testing the 200-month moving average at 5585 and the January low at 5545. A weekly close below here on Friday will therefore add pressure into the end of February and risks a slide to 5410/00 and then the 2012 low at 5215/11. This is just below the less important 50% Fibonacci support at 5265 that you can see in the monthly chart below.

You can also see that failure here is likely to target the 61.8% Fibonacci at 4835. This is not too far above the 2011 and 2010 lows at 4757/4701, so this 100 or 125-point band will be enormously important if we fall another 15% from where we are trading today.
Jason Sen
Technical Analyst & Trader
For more information, trading education and offers visit InterTrader Direct
The content of this article is the personal opinion of the author and not InterTrader Direct. The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest. Nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.

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