After hitting the upper bound of the rising channel, where CAC40 continues to trade in since the beginning of May, the index reversed sharply to the downside and today broke below its key support area, at 5585. At the time of writing, the price continues to slide further south. For now, we believe there could be more downside to come. But given that CAC40 is already quite overstretched to the downside on a shorter timeframe, we may get a small correction before another leg of selling. This is why we will stay cautiously bearish for now.
CAC40 is currently testing its psychological 5500 level, which was also seen as a strong resistance on August 30th, September 2nd and 3rd. A few points lower runs the 100-day EMA, which could also provide additional support, from which CAC40 could rebound and crawl back for a bit of correction, which we mentioned above. If that happens and the index retraces back up a bit, but fails to get back above the 5530 zone, marked by the low of September 25th, this could result in another leg of selling. We will aim for the 5500 hurdle again, a break of which could send the price further down the line, potentially targeting the 5439 hurdle, or even the 5400 level, marked by the inside swing high of August 27th.
Our oscillators, the RSI and the MACD, are somewhat in support of the above-discussed scenario. The RSI is below 50 and points to the downside. The MACD is below its trigger line and points to the downside, while sitting above zero, for now.
Alternatively, if we see CAC40 rising back above the previously-discussed 5585 barrier, this could open the door for another move higher, possibly targeting the 5645 hurdle, which was seen as a good resistance on September 27th. If the buyers don’t stop there, a further move up could bring the index to this year’s high, at the 5705 level. Slightly above that sits the upper side of the aforementioned rising channel, which could get tested as well.
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