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FR 40 Technical Analysis - FR 40 Trading: 2017-04-18
This week presidential election will take place in France
This Sunday, on April 23, 2017, the 1st round of the French presidential election will take place. Will the political struggle escalate and will the French stock index САС 40 correct?
Last week it updated its record high since August, 2015. Currently, there are 4 presidential candidates with nearly the same ratings. Two of them, Marine Le Pen and Jean-Luc Melenchon, favor the country’s exit from the European Union. The other two candidates- Francois Fillon and Emmanuel Macron, adhere to liberal views and the preservation of the EU membership. Weak economic data may also be contributed to the possible correction of the CAC 40. The French trade deficit in January of the current year was the biggest since the beginning of its publication in 1970 and amounted to 8.1 billion euros. In February, it fell to - 6.6 billion euros which is also a very negative indicator. Note, that the Eurozone trade balance in January was also negative, but only in the amount of 0.6 billion euros. The industrial production of the Eurozone declined by 0.3% in February in monthly terms, while that of France by much more- 1.6%. Despite the much worse economic statistics, the French stock index CAC 40 and the pan-European EU Stocks 50 index rose almost equally - by 17%, since the beginning of the global surge in the world stock markets after Donald Trump’s victory in the US presidential elections on November 8, 2016.
On the daily timeframe, FR40: D1 overcame the support line of the ascending channel and is trying to correct down. The further decrease of the index is possible in case of the escalated political situation over the French presidential elections as well as in case of the publication of weak economic data and corporate earnings.
- Parabolic indicator gives bearish signals.
- The Bollinger bands have narrowed, which means lower volatility.
- The RSI dropped below 50. It has formed a negative divergence.
- The MACD gives bearish signals.
The bearish momentum may develop in case FR40 drops below the last fractal low at 5040. This level may serve as the entry point. The initial stop-loss may be placed above the last fractal high, the record high since August 2015 and the Parabolic signal at 5160. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop level at 5160 without reaching the order at 5040 we recommend cancelling the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
| Position | Sell |
| Sell stop | below 5040 |
| Stop loss | above 5160 |
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