CAC forecast for the week of October 20, 2014, Technical Analysis

The Parisian index fell significantly during the course of the week, but found enough support at €3800 level to turn things back around and form a big hammer. This hammer of course suggests that there is plenty of buying pressure underneath, and with that we do remain hopeful that the Parisian index will continue to go higher. If we can get a break above the €4100 level, we feel that the market could very easily go to the €4500 level given enough time.

The shape of the hammer is of course perfect, and will certainly attract quite a few out there in the trading community that are looking to get in based upon value. After all, the CAC is one of the more “stable” markets in the European Union, and as a result it makes sense that we may see buyers step into this marketplace the for many of the other stock markets around the European continent.

If we pullback from here, we suspect that there are quite a few of buying orders below, probably well documented at the €4000 level, as well as the €3800 level. With that being the case, we think that pullbacks will continue to be buying opportunities on shorter-term charts as well, and therefore we are willing to buy at lower prices also, not just a break out to the upside.

If the €3800 level is broken to the downside that would of course be a very negative sign for this market, as the sellers would then take control yet again. Because of that, the market would then probably drop down to the €3600 level first, and then possibly even as low as €3000 given enough time. However, we have to assume that the massive hammer that has form for the week suggests that we will more than likely find enough buyers to turn things around again. Because of this, we are much more comfortable buying, but we want to see some type of technical signal to do so first. Until then, we will have to remain patient.