Potential signal:
- I would be a buyer of the CAC if we dip to the €8000 level, with a stop loss at €7870.
- I would be aiming for the thousand €250 level as a target.
The French CAC 40 has been bullish yet again during the trading session on Thursday, as the massive uptrend and momentum driven market continues to show its strength. At this point in time, I have no interest in trying to short this market, because it is far too strong to do so. That being said, if I was already invested here, I would probably start to think about taking profit as we have gotten so stretched that it’s difficult to imagine that the market suddenly slices through the crucial €8250 level.
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The €8250 level is an area that had formed a major top recently, punctuated by a massive “double top” forming there. Breaking up above that would obviously be a very bullish sign, and I think just about everybody in the marketplace would be looking at that as a signal that we are going to go much, much higher. Keep in mind that Francis is starting to come out of a recession, so that of course has a positive influence on CAC 40, as traders are looking to find some type of growth in a market that is nothing short of chaos all the time.
Technical Analysis
It doesn’t really matter what indicator you use, they all will tell you the same thing: that the CAC is overbought. Because of this, I’m looking at a short-term pullback as a potential buying opportunity, especially if we pull back toward the €8000 level. The €8000 level obviously is a large, round, psychologically significant figure, and an area that would attract a lot of attention via headlines. Do not like the idea of trying to get too cute here, and therefore I’m just waiting for opportunity to pick up a little bit of “value.” Chasing the trade at this point in time is dangerous, it will probably only lead to heartbreak.
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