Reversal patterns emerge on stock indices

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.

FTSE 100 Daily
 

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.

DowJones Daily

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.

Gold Daily