CAC40 Price Analysis: Buying a dip towards the right shoulder
CAC40 Price Analysis Expect intraday trading to remain mixed and volatile. Buying a dip and focusing on the previous swing high offers a sound technical reward against risk support.
Market highlights from the last week
Friday 15th May: The US retail sales slump was deeper than expected, reinforcing a major second-quarter GDP contraction
Monday 18th May: Risk appetite strengthened sharply during Monday with increased optimism over the global outlook and hopes for positive moves towards a coronavirus vaccine. Equity markets moved sharply higher with US markets at fresh 2-month highs
Tuesday 19th May: Euro-zone equities were subjected to a limited correction early in Tuesday’s session, but underlying sentiment held firm as the EU Commission proposed an overall EU recovery fund of over EUR1.0trn
Wednesday 20th May: Risk appetite was more fragile on Thursday as US-China tensions continued to unsettle confidence and had a larger impact
Thursday 21st May: Euro-zone equities opened lower and gradually lost ground as the PMI data reinforced fears that the underlying economic recovery would prove tentative. Underlying global trends were also less supportive during the day with measured US losses.
CAC40 Price Analysis
Let us have a look at the technical viewpoint:
Monthly: Traded to a multi-year low of 3516 in March. April’s price action did post net gains, but all trading was confined to the lower half of the previous months range
Weekly: Mixed trading for the last six weeks. Levels close to the 50% pullback of 4828 (from 6139-3516) have found selling interest. Week 27th posted an Inverted Hammer candle, often seen at the top of a trend. We should note that current price action is close to the previous swing low of 4481, week 17th December 2018
Daily: We look to be forming a bearish Head and Shoulders pattern. However, with the previous swing high (left shoulder) located at 4592, there is ample scope for further buying.
Intraday 4-hour: Levels close to the 50% pullback of 4381 (from 4196-4567) found buyers. Expect intraday trading to remain mixed and volatile. A move down to 4275 (78.6%) would form a bullish Gartley pattern and offer and upside bias
Outlook: Expect intraday trading to remain mixed and volatile. Buying a dip and focusing on the previous swing high offers a sound technical reward against risk sup
Possible trade setup
Action: Buying at 4275
Potential return on risk to first target: R3.9 (reward 315 / risk 80)
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