Reversal patterns emerge on stock indices
City Index April 9, 2012 4:10 PM
<p>Sandy Jadeja, Chief Technical Analyst at City Index, analyses the market to identify key technical levels for major commodities and indices markets including the FTSE […]</p>
Sandy Jadeja, Chief Technical Analyst at City Index, analyses the market to identify key technical levels for major commodities and indices markets including the FTSE 100 and Dow Jones this week.
09/04/2012, Sandy Jadeja, Chief Technical Analyst, City Index
Reversal patterns emerge on stock indices
After seeing a rounded top pattern develop on the FTSE 100 we have also seen a shift in momentum. This has taken the FTSE 100 lower into the start of April. The US Dow Jones has also created a bearish Double Top pattern and whilst both indices have traded higher into the first quarter the second quarter may prove to be a challenge for the bulls if key resistance levels are not cleared soon enough. The potential for higher prices should not be ruled out but caution may be required if momentum turns weaker into the start of the month. Gold prices have also reached lower price targets and may see a reversal to the upside. See key levels below:
FTSE 100 creates a momentum reversal
We have seen the FTSE 100 fall from the 6000 resistance level and break below initial support of 5820. So far the index has managed to stay below the support level but more importantly the 5877 should prove to be the decision maker. As long as the bears can keep the index below this level we could see lower prices being reached. The 5690 level followed by 5580 are near term targets as long as the market fails to trade higher. Previously the FTSE 100 did create reversal bars on two occasions and had failed to bring the index lower. Third time may prove to be lucky for the bears this week.
Dow Jones retests 13270 highs
Once again the Dow Jones is testing the 13270 level. If the index clears past 13270 the doors to 13550 may see a trend continuation take place. A spike higher followed by a lower close could also take place which would confirm that the 13270 is proving to be a tough barrier to cross. What is important to keep in mind is that the bullish trend is still intact with the Dow and we have not seen any bearish momentum trend reversal bars develop. Watching for a break below 13150 may lead to the Dow reaching for support at 12700 over the coming weeks. After 3 months of a continued uptrend a reversal may be at hand.
Gold trading within a channel
Gold Reached the expected lower target of $1630 and has managed to trade back towards the $1660 level. It will be important for the metal to turn bullish via a momentum trend reversal. This should be followed by a move above $1715 to confirm that the short term trend has provided enough evidence to see a move towards the $1800 level. If Gold is unable to sit above $1630 the opportunity for $1575 is likely. The trend is still bearish as indicated by the red momentum bars. A trend reversal is required to lift Gold higher.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.