Last time we posted our analysis on the French CAC index (http://wp.me/p2YWWw-du),we mentioned how cautious bulls ought to be because a correction was imminent. At that time CAC was trading around 3844 and we mentioned that short positions were to be favored specially if prices break below 3825. Our correction target was 3700. Then the Cyprus incident came and the index fell sharply towards 3780 and pulled up the same day towards 3830-40. At that point our members were informed that we were following our initial plan to sell at 3825 with 3700 as a target. A few days later we find CAC at 3731 with 3670 as a low.
Now that our target has been achieved, its time to check if the trend is about to change and what to expect next. Our view is that the trend will change upwards. For this view to remain valid we have two conditions. Prices should not break below 3640 and the index should start to move upwards in an pattern and break resistance of 3770. Longer term support also supports our view as shown in the chart below.
The index is still trading inside the big upward channel and the 3650 area is the support by the lower pitchfork line. We give more chances for an upside bounce than a break of the support line with the first try. If you need more help trading this index, don’t hesitate to contact us.
As always, thank you for taking the time to catch up on my thinking.