Euro Stoxx 50 stock index lost 1.8% on Wednesday to find support at the 7-week low of 3,340 which stood as a barrier to the downside as well as to upside corrections a number of times in the past. This is also where the 78.6% Fibonacci retracement of the up-leg from 3,260 to 3,593 is currently located.
In the short-term, bearish pressures are likely to hold as the MACD increases strength to the downside in negative territory and below its red signal line. However, according to the RSI and the Stochastics, the recent fall could be overextended, and a rebound may be around the corner, with the former set to meet its neutral threshold of 50 after bouncing at the 30 oversold mark, and the latter on track to post a bullish cross below 20.
In case of a reversal, the market could rest around the 61.8% Fibonacci of 3,387 before it heads towards the 50% Fibonacci of 3,426. Further up, resistance could run between the 50- and the 200-day (simple) moving averages, this is between 3,451 and 3,494. Yet, it would be more interesting to see whether the bulls can overcome the 3,545 peak, enhancing the case for additional upside moves in upcoming sessions.
Looking at the downside, Wednesday’s low of 3,340 could come into view ahead of the 3,300 support which could be of psychological significance. Even lower, if the price manages to violate the 3,260 bottom, shifting the long-term outlook from neutral to bearish, the next level to watch could be May’s 2016 high of 3,160.
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