Potential signal:
Buying the CAC is the only thing you can do, so that’s exactly what I’m doing now. I would put a stop loss just below the €8000 level, with a target of €8500 above. If we can break above the €8300 level, then I will probably add to the position.
- The Parisian CAC initially pulled back during the early hours on Wednesday but has found buyers underneath to turn things around and pressure to the €8,250 level.
- The fact that we have turned around the way we have done suggests that eventually we break out to the upside, and that does make a certain amount of sense.
Considering that European stocks in general have done quite well. Granted, we are a little overstretched at this point, but over the last couple of days we have been consolidating a bit. So, with that being the case, it does make a certain amount of sense that eventually we break to the upside. After all, this gives the market a little bit of time to catch its breath and then and eventually take that new momentum and straight up in the air, we go.
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Pullbacks Could Be an Opportunity
So, with that, I think you have to look at any pullback as a buying opportunity. With the 50 day EMA sitting near the €8,050 level and climbing, and then after that we have the €7,900 level as support. I think given enough time, the Parisian can probably drive all the way to the €8,400 area, and based upon the measured move, it could even be as high as €8,500, maybe even €8,550.
Either way, there's nothing on this chart that even remotely looks like it's going to warrant a short position. So, you are a buyer. Or a buyer on the breakout or a buyer on the pullback. Shorting this market is all but impossible at this point in time. Ultimately, this is a market that I think has a lot further to go to the upside, and therefore you have to treat it as such. Keep in mind that it’s possible that the ECB will start cutting rates fairly soon, and it looks like the equity markets are trying to front run that in particular monetary policy decision.
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