(Thanks Tommy C for providing this)
European equity benchmarks ended lower Wednesday, as bank shares slumped after France’s Société Générale SA posted a drop in profit and metal’s related stocks declined after an update from Rio Tinto PLC. Deutsche bank falling by 1.1% also added to the bearish sentiment currently building on the DAX.
Technically we had seen a recovery from last week’s bearish moves back up above 12200 suggesting a potential bullish reversal, however we have now seen a subsequent move back below this level which could suggest the bears are still in control. With price still comfortably below the 50 period SMA on daily time frame, momentum remains to the downside. If we take out 12075 then the technical bearish trend is still in place.
Intraday bias: Short below 12200 targeting downside supports of 12150,12095 and 12050 in extension.
Alternative scenario: Long above 12200 targeting upside resistances of 12250,12280 and 12300 in extension.
A break below 12075 opens up further downside with 11970.00 & 11870.00 as targets. Shorting from resistance nearer to the recent daily highs is also a good strategy. Most of the move has already happened, so waiting for better spots higher up would be prudent.
Buying at support, which is between 12075-12100 offers the best reward to risk opportunity. Alternatively, if we break support at 12075 it could open a bear trap and allow buyers to come in and squeeze them out. Our preference is long positions above 12075.00 with targets at 12285.00 & 12400.00 in extension.
Support and Resistance
U.K. stocks ended a highly volatile session slightly lower on Wednesday after the British government laid out plans for spending and taxes as it works to exit from the European Union.
The FTSE 100 ended roughly 0.1% lower at 7,334.61 for a fifth straight session of losses. That marked the longest losing run for the index since early November.
Treasury chief Philip Hammond outlined the last budget before the U.K. begins its flight out of the European Union. He said the 2017 forecast for British economic growth was upgraded, to 2% from a previous estimate of 1.4%. But growth is expected to slow in 2018.
With BOE rate decision meetings at lunchtime, we could potentially see sideways movement.
From the technical perspective, we are currently in somewhat of a consolidation. Price has failed to break out of the 7500 to 7300 zone. There currently seems to be no real direction however a break above 7500 could see a resumption of the longer term up trend. A subsequent failure at this level however could see bears taking control.
Intraday bias: Long above 7500 targeting 7550 and 7600 in extension. Any hints of a rate increase by boe could change this rapidly so keep an eye on that meeting.
Alternative scenario: Short below 7500. An ideal situation for bears would be a re-test and successful defence of of 7500. From we could here we could see price move to 7300 and 7250 in extension.