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The Euro Stoxx 50 is in price discovery or more simply unchartered water right now, as European equity markets continue to benefit from the positive risk sentiment sweeping through global financial markets.
Bullish IFO survey numbers from the German economy this week have seen the Euro Stoxx 50 hitting a new all-time high as investors price in improved future growth prospects from Europe’s largest economy, which is often considered to be the engine Europe.
As positive tones sweep through European bourses it is worth watching the other heavyweight index’s in Europe are up to, such as the ITA40 and CAC40. The CAC40 appears to be on the cusp of a major upside breakout, while the ITA40 continues to benefit from improved confidence towards the Italian political backdrop.
The Euro Stoxx 50 is heavily comprised of German and French stocks. Both Germany and France are considered to be the top economies in the eurozone, so when stocks inside the German DAX and the CAC 40 rally, it is likely to be extremely bullish for the Euro50.
In terms of bullish targets for the Euro Stoxx 50 it may be prudent to look at the upside potential for the German DAX, as this can also help gauge the future price path of Euro 50 index. The technical for the German DAX are pointing towards 18,000, meaning that the Euro Stoxx 50 could be headed above the 5,000 level.
Looking at the ActivTrades Market Sentiment some 76% of traders are bearish towards the Euro Stoxx 50, despite the index hitting a new all-time high this week above the 4,000 level.
I suspect the Euro Stoxx 50 will continue to head higher while sentiment towards the index remains extremely negative. Typically, retail traders have poor market timing and lean against the prevailing market trend.
Euro Stoxx 50 Short-Term Technical Analysis
The four-hour time frame shows that a bullish breakout from a symmetrical wedge pattern has taken place and is projecting an upcoming rally towards the 4,200 level for the Euro Stoxx 50.
According to technical analysis buying price dips towards the 4,000 or 3,950 support areas could be the best strategy in the short-term, in expectation of further upside and continuation of the breakout.
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Euro Stoxx 50 Medium-Term Technical Analysis
Looking at the higher time frames the daily chart continues to show plenty of scope for upside, as the Euro Stoxx 50 has invalidated a huge head and shoulders pattern after moving above the 3,850 level.
As long as the price trades above key support, around the 3,850 level, we are likely to see the index gravitate towards the 5,000 level, and possibly the 5,500 level over the long term.
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