News & Analysis
Eightcap CFD technical insights: Some indices showing signs of over extension.
Traders we’ve seen a strong rally on most indices during the last trading week. Selling has stepped up on the Nasdaq and S&P500, tech sinking lower by more than 1% In Friday’s session. Earning surprises leading the tech sector lower. Earrings, GDP and trade continue as drivers.
Looking to some of the daily charts we can see signs of possible overextension creeping in. The US30 and GER30 charts have a 17 period CCI displayed for divergence only. Most momentum based indicators lag price, I personally only use them for pattern analysis like seeing divergence. Divergence patterns should only be used as a guide, price confirmation should be used to validate and confirm the pattern.
US30 daily – starting on the short term we can see has made a double high inside a resistance area. 25,400 currently stands as support after two tests in two sessions. The 17 CCI shows regular divergence after the last impulse rally to the current high. What is also grabbing my attention is the larger supply area in play from 25,322 – 25,778 you will notice this are has knocked back all entries since it was formed on 26th of February. Is this a starting point for a new deeper move lower?
GER30 daily – price stalling around the gap for a second time as existing resistance 12,816 (gap roof) comes back into play supplying buyers. Buyers also tested and were rejected by an older resistance point at 12,890 area. The 17 CCI has divergence developing but will need lower prices to confirm, as on the US30 an impulse higher (HH). With a strong rejection seen on Friday are we seeing buyer number dropping with a potential leg lower setting up?
For next week from the buyer side, if short-term support continues to hold for the US30 we could see another push higher as on the GER30 12,765 could devalop into short term support. Traders, FOMC statement and funds rate on Thursday morning, Non-Farm payrolls on Frday.
Good Trading from Eightcap.
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