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The CAC 40 started the former trading week in a positive fashion, hitting a new all-time trading high, around the 7,385 level, as traders swept aside fears over the Omicron variant and rising energy prices in Europe.
However, the CAC40 started to under a pullback towards the latter part of the trading week, with the CAC40 index losing over 100 points as fears over a new COVID-19 variant started doing the rounds.
A new strain of the COVID-19 disease, named IHU the new B.1.640.2 variant is so far known to have infected 12 people living in south-eastern. France scientist have so far identified that it has 46 mutations.
The first case was linked to a person with a travel history to Cameroon, western Africa, said researchers in a paper published on medRxiv. However, experts were quick to announce that just because a new variant had been discovered, that did not necessarily mean IHU will prove as infectious as other strains, including Omicron.
Do keep an eye on this story, because aside from FED rate hike chatter, it certainly does have the potential to rock French stock further, especially if we see more IHU cases popping up.
Looking at the ActivTrader Market Sentiment, we do need to be cautious as well, as some 77% of traders are bullish towards the leading French index. This is start contrast from the Euro Stoxx 50 and FTSE100, which have negative sentiment biases.
I suspect the CAC 40 will continue to head lower while sentiment towards the index remains high. Typically, retail traders have poor market timing and miss out entirely or even lean against the prevailing market trend.
CAC 40 Short-Term Technical Analysis
The four-hour time frame shows that a massive, inverted head and shoulders pattern has been activated, with the pattern pointing to more gains towards the 7,700 level.
According to the Ichimoku indicator reversal risks are growing, as the Ichimoku cloud starts to widen. No sell signal is in place yet, but it is possible we could at least see a test towards the bottom of the cloud this week.
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CAC 40 Medium-Term Technical Analysis
Looking at the daily chart it continues to show plenty of scope for further downside, as a major test of a key trendline, from a rising price channel has taken place. And a rejection is underway.
The scope for further downside is possible towards the middle of the price channel all the time while the index struggle to clear the channel. Typically, these are bearish reversal patterns.
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