After drifting lower for the whole month of May and trading below a short-term downside resistance line drawn from the high of May 1st, the CAC 40 index has broken above that line and made its way higher, where it met good resistance near the 5360 barrier, marked near the highs of May 27th and 28th. Even though there is a good chance to see a continuation to the upside, still, we will wait for a confirmation break and a daily close above the 5360 level first, before getting comfortable with a further move north.
As mentioned above, a push above the 5360 hurdle could invite more buyers into the field and such a move may clear the path towards some higher areas. This is when we will examine a possible move to the 5452 obstacle, marked near the highs of May 16th and 17th. Even though we could see a small correction back down from that obstacle, still, if the French index continues to trade above the aforementioned downside line, we will remain positive in the short run. If the price accelerates and breaks above the 5452 zone, this could open the door to another move higher, where the next potential resistance area could be seen at 5522, which is the low of May 2nd and the high of May 6th.
Looking at our oscillators, the RSI and the MACD, both seem to be in support of the upside scenario. The RSI has just recently moved above 50 and now points to the upside. The MACD, although still below zero, is showing signs of bottoming and shifting back up, by pushing above its trigger line.
On the other hand, a drop below the downside line and the 5223 hurdle could spook the buyers for a while, as it may clear the path to the 5151 zone, marked by the low of June 3rd. If the price rebounds from there, but remains below the previously-mentioned downside line, this may result in another leg of selling, which might bring CAC 40 below the 5151 area and lead it towards the 5090 level, marked near the highs of February 5th, 6th and 7th.
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