European stock markets hold longer-term support perfectly
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.’
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.
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.
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.
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.
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.
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.
Technical Analyst & Trader
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