CAC Forecast: On Verge of Major Breakout

This is a market that certainly looks as if it is on the precipice of making a bigger move to the upside and beyond.

The Parisian CAC Index initially pulled back on Wednesday but found enough buyers underneath to turn around and form a bit of a hammer. The €6800 level above has been a bit of a barrier, but it certainly looks as if the action over the last couple of days suggests that we are on the precipice of a breakout. On a daily close above the €6800 level, the market is likely to go looking towards the highs again near the €6900 level. Quite frankly, I think that area has a lot less in the way of resistance, and we are more than likely going to go towards €7000 which is a much more formidable psychology-driven barrier.

To the downside, the 50-day EMA sits just above the €6600 level, and I think offers a bit of support. When you look at the recent price action, you could make a bit of an argument for an ascending triangle, but at the end of the day the thing that truly matters is that there are buyers that are willing to pick this market up and go much higher. Keep in mind that the Parisian index will follow the other indices around the world higher, as it is a little bit more in the way of alpha when it comes to movement as opposed to other ones such as the DAX or perhaps even the Dow Jones Industrial Average. There are a lot of luxury brands represented in the CAC, so it does make sense that we would see more movement out of this market once there was more of a “risk on move” overall.

If we were to break down below the 50-day EMA, then it is likely that the market could go looking towards the €6400 level, which is where the 200-day EMA is racing towards. If the CAC does make this move, then you will probably see similar moves in other indices around the world. The totality of stock markets around the world tend to move in the same direction, so the CAC will not be immune to external influences. Regardless, this is a market that certainly looks as if it is on the precipice of making a bigger move to the upside and beyond.

CAC 40 Index

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.