DJIA, DAX, and FTSE All Showing Head-and-Shoulders Topping Patterns
May 14, 2020 10:05 AM
For followers of classic price action patterns, the bearish setup couldn’t be more clear for these major indices!
With major global equity markets trading off by 4-6% so far this week alone, the worst week in two months, we wanted to provide a quick update on a classic technical analysis pattern that points toward the potential for more weakness in the Dow Jones Industrial Average (DJIA), Germany’s DAX, and the UK’s FTSE 100 index.
All three major indices have formed well-defined head and shoulders patterns over the last five weeks. For the uninitiated, this pattern shows a transition from a bullish trend (higher highs and higher lows) to a bearish trend (lower highs and lower lows) and is often seen at significant tops in the market. With prices closing below the patterns’ “neckline” in all three cases yesterday, the patterns point to the potential for more downside in the coming days:
Source: TradingView, GAIN Capital
Of course, not every technical pattern plays out exactly as the textbook shows, so readers are encouraged to evaluate the fundamental and technical performance of the underlying constituents, as well as each country’s response to the ongoing COVID-19 pandemic, before placing a trade, but for followers of classic price action patterns, the bearish setup couldn’t be more clear for these major indices!
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.