Technical Analysis FR40 : 2018-06-22

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IFCMarkets Technical Analysis
IFCMarkets Technical Analysis

Expansion in French manufacturing and services sectors slowed in May. Will the FR 40 continue declining?

Recent French economic data were negative after the first quarter GDP was downgraded to 0.2% from 0.3% of the first reading. Retail sales fell 1.2% over month in April. Industrial production decline accelerated to 0.5% over month in April from 0.4% in March. The current account deficit widened in April to €1.1 billion from €0.6 billion in March. And the composite purchasing managers’ index reported by Markit declined to 54.2 in May from 56.9 in April, indicating slowing of economic activities. Furthermore, French growth is expected to slow to 1.7% after hitting a decade high of 2.3% percent last year, French INSEE statistics agency said in its quarterly economic outlook. Deteriorating economic data are bearish for French stock index FR 40.

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On the daily timeframe the FR40: D1 has breached below the 200-day moving average MA(200) which is still rising, this is bearish.

  • The Parabolic indicator gives a sell signal.
  • The Donchian channel indicates downtrend: it is tilted lower.
  • The MACD indicator gives a bearish signal: it is below the signal line and the gap is widening.
  • The Stochastic oscillator has breached into the oversold zone, this is bullish.

We believe the bearish momentum will continue after the price closes below the lower boundary of Donchian channel at 5259.33. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the last fractal high at 5559.83. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (5559.83) without reaching the order (5259.33), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary

Position Sell
Sell stop Below 5259.33
Stop loss Above 5559.83

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