CAC Forecast: Parisian Index Gaps Above Trendline

Christopher Lewis

I do believe that I will be long of this market next week, but the question is whether or not I get an opportunity to find value?

The Parisian index gapped higher to kick off the trading session on Thursday, skipping over a short-term downtrend line that has been relatively reliable. Because of this, the market looks as if it is trying to continue the previous uptrend, and it should be noted that we are now above the 50 day EMA, which in and of itself is a rather bullish sign. With that being the case, I think it is probably only a matter of time before we see further momentum.

That being said, I recognize the €6800 level above as a potential problem area, as it has been resistance recently. We are also a bit parabolic in the short term, so do not be surprised at all to see this market pullback to test that trendline for support, and perhaps even the 50 day EMA while filling the gap. In and of itself that would be a normal move and could offer enough value for people to get interested.

As we are heading into the Friday session, I would prefer to see whether or not we close above that downtrend line on the daily candle before putting money to work, meaning that I would not be putting on new positions until next week. If we can stay above that downtrend line, then it is very likely that we see a lot of upward momentum continue in this market as we go reaching towards the highs. Furthermore, you need to keep an eye on the Euro, because if it starts to get a bit too expensive, that could be a major issue for the CAC as it is highly levered to luxury exports. As French goods become more expensive in places like the United States, there of course are less exports to begin with, driving down profits.

To the downside, if we were to take out the €6500 level again, I think at that point in time we are more likely than not to go looking towards the 200 day EMA underneath which is currently sitting at the 6234 level and rising. Either way, I think that any selling opportunity will probably be somewhat short-lived, ultimately being bought up by the risk appetite that seems to be all over the stock markets worldwide, not just in France. Because of this, I do believe that I will be long of this market next week, but the question is whether or not I get an opportunity to find value?

CAC

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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