DAX 40 and FTSE 100 Index Technical Outlook: Biased Decrease

German DAX Index, UK FTSE Index – Technical Outlook:

• The DAX index has damaged under key assist.
• The FTSE 100 is breaking under the vary of a number of months.
• What’s the outlook and what are the important thing ranges to look at?

DAX Technical Forecast – Bearish

The slide of the German DAX index might have halted in latest days, however it’s too early to name the top of the downtrend. It is because a break under key assist final month’s March low at 12430 triggered a breakout from a triangle sample, pointing to a draw back correction in direction of 10400. Triangles are continuation/consolidation patterns, which means the previous pattern resumes after a breakout happens. In case of DAX the pattern is down from final 12 months.

Furthermore, since final 12 months, the index has been steadily transferring in direction of a ‘decrease gear’ inside an uptrend. That’s, the power of the uptrend is reducing, as evidenced by a break under the inner trendline of the rising Pitchfork Channel since 2016. Nonetheless, from a structural perspective, a retreat from 2021 shouldn’t be sufficient to recommend that the longer-term uptrend has been terminated.

DAX INDEX Month-to-month Chart

Chart created utilizing TradingView

Actually, the index has remained inside a long-term rising channel after the Nice Monetary Disaster. The decrease boundary of the channel is discovered close to 10900, which might present good assist for the present downswing. Moreover, the decrease fringe of the rising pitchfork channel from 2016 seems to be close to 10150, which may very well be one other supply of assist.

FTSE Technical Forecast – Bearish

The UK FTSE 100 index is holding above key assist on a horizontal trendline at 6840, however the danger of a break brief is rising. Any push under this barrier might set off a breakout from a multi-month sideways sample, which factors to a decline from resistance-to-support on the June 2020 excessive of 6512. The subsequent draw back may very well be the February 2021 low of 6315. The aim implied by the worth chart sample serves to 5965. To be truthful, such measured-move objectives might be meant as a broad information and never a rule, though in some circumstances they do maintain.

FTSE INDEX Weekly Chart

Chart created utilizing TradingView

As value motion narrows inside a spread, volatility tends to lower. Conversely, a breakout from the sideways vary will increase volatility, much like what occurred in 2017-2020 (see chart). The implication is that after the breakout happens, the index’s losses might speed up.

On the upside, the index has a reasonably robust resistance on the early October excessive of 7088. A brake above it’s wanted to cut back the strain under, at the very least briefly. Past the brief time period, the FTSE 100 index would want to interrupt above the 200-day transferring common (now at round 7375) to neutralize medium-term draw back strain.

— Written by Manish Jaradi, strategist at DailyFX.com