CAC 40 Offering Bearish Cues!

8 июл.

The CAC 40 – a major stock market index covering 40 of the largest companies by market capitalisation listed on the Euronext Paris – recently formed a double-bottom pattern off lows at 7,464. The neckline, taken from the high of 7,725, has also recently been challenged, yet price has failed to establish a close above the barrier to complete the pattern. Therefore, for now, the pattern is still unvalidated. You may also see current price action suggests buyers are unlikely to follow through here. Note that on Friday, a bearish engulfing candle formed. Monday’s action is also on track to offer up a bearish outside day formation (unlike the engulfing pattern, which only takes into account the real bodies, a two-candle outside day considers only the upper and lower shadows).

Regarding the Ichimoku Indicator, price action recently crossed above the Conversion Line (blue – 7,601) but remains below the Base Line (red – 7,764). However, with the Conversion Line now below the Base Line, this is considered a bearish signal. Similarly, we can see that the Leading Span A (light green – 7,682) is now below the Leading Span B (orange – 7,857), which is another bearish cue and provides traders with a resistance zone to work with, commonly referred to as a Kumo Cloud or Ichimoku Cloud.

Price Direction?

Because of the current candle action at the underside of the double-bottom pattern’s neckline, and this market is clearly in an early downtrend since forming the double-top pattern off all-time highs of 8,259, bears could soon make a show and challenge the pattern’s lows of 7,464 and try for support at 7,352. However, If we do see price action close above the double-bottom pattern’s neckline, buyers may soon find resistance from the Kumo Cloud.