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S&P 500, Nasdaq 100, DAX 40, and SA40 indices forming bullish price reversals?


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Major indices the S&P 500, Nasdaq 100, DAX 40 and SA40 have all started to give some technical indication that a change in their respective price trends could be nearing.

Indices
Source: Bloomberg
 
 

Major indices the S&P 500, Nasdaq 100, DAX 40 and SA40 have all started to give some technical indication that a change in their respective price trends could be nearing.

S&P 500 – double bottom testing breakout

S&P 500 chartSource: ProRealTime

 

The S&P 500 index is currently testing the 4095 resistance level. A close above this level would confirm a double bottom (‘W’) reversal pattern. The reversal pattern would suggest a change in directional trend from down to up.

Should the pattern confirm with an upside breakout, 4300 becomes the initial target from the move, while a close below the 4000 level could be used as a stop-loss indication for the trade.

Nasdaq 100 – double bottom

Nasdaq 100 chartSource: ProRealTime

 

The Nasdaq 100 (US Tech) also looks to be forming a ‘W’ shaped reversal pattern. The pattern is, however, less evolved than that noted on the S&P500.

A close above 12570 would confirm the pattern, in which case, 13535 would become the initial upside resistance target from the move.

DAX 40

DAX 40 chartSource: ProRealTime

 

The DAX 40 (Germany 40) is currently testing the breakout level of an inverse head and shoulders reversal pattern. The pattern also suggests a short-term change in directional trend from down to up.

A close above the neckline of the pattern (as is currently trading) would put the pattern into play. In this scenario, 14820 would become the initial upside resistance target from the move, while a close below either the 13850 or 13690 level (depending on appetite for risk) could be used as a stop-loss indication for the trade.

South Africa 40 Cash Index

SA40 cash index chartSource: ProRealTime

Our criteria for a bullish price reversal on the South Africa 40 Cash Index is close to being realised.

The index has now broken through trendline resistance and is now testing an upside break of the 63650 level. A close above 63650 would confirm the upside breakout from a double bottom (‘W’) reversal pattern. The ‘W’ reversal is a suggestion that the market has now stopped making lower lows and is now starting to make higher highs i.e. a change in market direction.

Should the close above 63650 confirm, 64555 becomes the initial target from the move. A close above this level would further target 65600 as the next resistance level. In this scenario (should it manifest), traders might consider using a close below today’s (27 May) intraday low at 62900 as a stop-loss indication for the trade.

 
Shaun Murison | Senior Market Analyst, Johannesburg
2
8 May 2022
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