The Euro Stoxx 50 cash index surged on Friday, breaking above the medium-term downside resistance line taken from the high of the 27th of September. What’s more, since it bottomed on the 27th of December, the index has been trading above a short-term uptrend line, which, combined with the aforementioned break, paints a positive near-term outlook for now.
Following the move above the downside resistance line, the price hit resistance near the 3140 zone and today, the index retreated somewhat. That said, it remains above the short-term uptrend line and thus, we would expect the bulls to take charge again soon and aim for another test near that area. If they prove strong enough to drive the battle above 3140, then we may see them targeting the high of the 5th of December, at around 3170. Another move higher, above 3170, could see scope for more upside extensions, perhaps towards the 3205 territory, defined by the inside swing low of the 3rd of December, as well as the high of the 28th of November.
Taking a look at our short-term oscillators though, we see the case for some further retreat before the bulls decide to pull the trigger again, perhaps for a test near the crossroads of the aforementioned downside resistance line and the new short-term uptrend line, at around the 3100 mark. The RSI has topped within its above-70 zone and fell back below 70, while the MACD, although above both its zero and trigger lines, shows signs of topping as well.
In order to abandon the bullish case, we would like to see a decisive dip back below 3085. Such a move could signal the break below the short-term uptrend line and could also place the price back below the medium-term downside line drawn from the high of the 27th of September. The bears could then push the action towards the 3040 support zone, the break of which may allow them to put the 3015 obstacle, or the psychological round figure of 3000, on their radars.
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