Technical Analyst, Saxo Bank
DAX jumped higher last week cancelling the possibly top and reversal pattern. Extending the uptrend to almost 2.00 projection of the December correction.
However, the uptrend is still quite stretched illustrated by the RSI divergence. DAX could be forming a rising wedge like pattern but not yet confirmed. However, a bearish break of the lower rising trendline could indicate a correction. But the trend is still up and the trend is your friend – unless it is about to end. A close below 14,900 is likely to end and reverse the uptrend.
BEL 20 seems to be in a bit of a limbo at the moment. Bearish Engulfing top and reversal pattern is still in play and if BEL 20 closes below 3,821 down trend has been confirmed. Support at around 3,757 – 3,702.
However, RSI is bullish and with no divergence indicating BEL 20 could move higher above 3,929 thereby cancelling the top and reversal pattern. Strong resistnace around 4,012-4,031.
Medium-term BEL 20 seems to be trading in a rising channel . Strong resistnace at 3,985. A bearish breakout of the rising channel could lead to a sell-off down to around 3,3740
CAC 40 spiked above 7,150 resistance extending uptrend. RSI indicates higher CAC 40 levels are likely. Next resistnace at around 7,376.
Key support at 6,946 which could be tested if CAC breaks below 7,080. But for a trend reversal a close below 6,946 is needed.
RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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