Possible short/medium-term Bullish action in FRA40

Author: Vin Coco, participant of the Analyst Contest

The market has today provided a new positive signal for the short term trend change for bear to lateral-bullish.

Although the medium-term trend is still set to the downside, today’s close seems to confirm a temporary stop, with the possibility of an upward move in the following days.

Elements to be considered for the Trading Forecast (Technical Analysis):

PROS:

• Today Bullish Engulfing Pattern has confirmed the previous level of recent Support establish by a Bull Hammer on May 06 (green arrows);
• Rising channel/trend line is supporting price (Blue dotted line);
• After a close above 4370 area, the Risk:Reward is interesting;
• The possible bounce is at about 50% Fibo retracement;
• Stochastic Divergence;
• SMA 20 (blue) and 50 (red) are pointing down but still set in Bullish configuration.

CONS:

• The long term trend has still a negative bias;
• Theprice is still almost lateral;
• Theworst R:R scenario must take into account the R level defined on APR 6-8 by other 2 Bullish Piercing Patterns (green arrows and blue continue lines);
• TheSMA200 is still above the price but quite distant so a bounce is possible in the next few days;
• A decent close below 4200 is a clear sign of Bear trend resumption;
• On Weekly chart (medium-long term) the SMA 200 and SMA20-50 are set in Bearish Mode, but the SMA200 could push up the price.

Daily Graph

Weekly Graph

Any comments and suggestions below are very welcome.

Source:: Possible short/medium-term Bullish action in FRA40