The CAC40 shaded has started to recover towards the 6,550 area, as the index moves away from the worst levels of the month after it slid lower, following the re-election of French President Emmanuel Macron this weekend.
A more bullish tone has returned to European equities after the French CAC 40 Index relinquished recent gains as risk sentiment soured, driving stocks lower.
After ending the week just short 6,500, French stocks had gapped lower, forcing the Index to open the week at 6,400. The price action is now looking more bullish.
Something that could be bullish for European stocks is the euro. The EURUSD pair looks to be headed towards parity, which could be great for European manufacturers.
The fact that the CAC40 continues to hold onto to psychological support, amidst the combination of heightened price volatility and risk aversion, it is a good sign, especially with the bullish catalyst coming from euro weakness.
Sentiment towards the CAC40 is still bullish according to the ActivTrader market sentiment took. This it could be a sign that a full-on price rally is not yet ready to happen.
We probably need to see sentiment turn bearish before a big rally takes holds, as retail traders are typically on the wrong side of the market.
The CAC40 bounced off a critical pivot at 6300 earlier this week. The bullish trend will accelerate if buyers can rally the price above the 6700 level.
Looking at the four-hour time frame chart, it is very clear that the CAC40 is trapped inside a bullish falling price channel, which is typically considered to be a bullish pattern.
Looking at the daily time frame bulls need to move the price above the 6,800 level to move the CAC40 away from the danger zone, and for the overall trend to turn bullish again. If weakness in the euro currency continues, I think a breakout to the upside will be inevitable.