Bearish Rising Wedge in the Paris CAC40

Click on chart for larger image

The Paris Stock Exchange CAC 40 Index closed on Tuesday 7th February 2012 at 3411.54.

A Rising Wedge, such as the one depicted above, often signals that a reversal in the direction of prices is in the offing. Since prices have been rising that means that they may soon be falling.

The wedge in the chart above has for its boundaries the rising and converging blue lines.

If prices rise above the upper boundary line then the wedge pattern will vanish and indicate that another pattern is unfolding. In that case the following forecast would be revised.

But if prices begin to fall below or out of the lower boundary line, then prices will most likely fall back to at least the 2950 level.

Note the deplorable state of the descending 150 day SMA (Simple Moving Average) in red. Also, the same situation holds for the 200 day SMA in yellow.

The rising 50 day SMA in green might bring a smile to the faces of the bulls. But I wouldn’t put too much faith in it – especially at this moment in market history.

The entire upward thrust from the low of 2693.21 on Sept 23^rd 2011 is countertrend to the greater down trend which began at least on July 7^th 2011 at the high of 4020.33.

Good luck, Bonne chance to one and all

James Leo Donoghue

in Sydney, Australia