Charts show the blue chip Euro STOXX 50 index’s 50-day moving average crossing below the 200-day moving average in early trading on Wednesday, a strongly bearish technical signal called ‘death cross’, which usually means further losses in the index six months down the road.
“This confirms the current medium-term trend, and at the same time, there isn’t any sign whatsoever of a trend reversal for European indexes, so it’s crystal clear that this downtrend is set to continue,” saiys Vincent Ganne, technical analyst at TradingSat, in Paris.
The Euro STOXX 50 index last week halted a sell-off started in mid-March during which it plunged 19 percent, and has been testing its downward trendline over the past two sessions, but it failed to close above it, sending a negative signal.
“For most European markets, last week’s bounce was quite weak and so far the move has been developing into a sideways pattern, which has a corrective and therefore a bearish character in the bigger picture,” Michael Riesner, head of equity technical analysis at UBS Investment Bank, writes in a note.
“Even if we should see a temporary extension of the current bounce early this week, given the weak patterns and structures in the market, we continue to see the risk of at least one more down leg into June, which still suggests prices below 2,100 in the Euro STOXX 50.”
The index’s next big support level is at 2,066 points, which represents a low hit in late November.
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