Dutch AEX Technicals: New energy needed to confirm bullish action
The last couple of weeks have been quite odd, I think, as the AEX has been taking out previous peaks in a kind of sneaky and stealthy manner. This makes me very suspicious. Nonetheless, at the end of the day, price is king and the sole judge of if one is right or wrong and prices have been going up. I have one very potent bullish trading idea I would like to share with you.
Prerequisites: The correction in the Dutch market seems to have ended on the 16th of November and the Index has since then been in an uptrend without experiencing any larger pullbacks. The 50 day MA is turning positive and the 200 MA is going higher. Overall the AEX has been within a larger uptrend since September 2011. I interpret this larger uptrend as corrective, which means that eventually this market is going to get caught up in a severe bearish trend taking this market much lower than where we are today. We will probably re-test the lows set in 2009 at some point in time.
The AEX has taken out the recent highs of the bull move that started in June this year which is good news, but this short term rally looks like it is could be losing momentum and has nearly run its course I think.
Other interesting features are that the market has immediate support at 340 and there's also a gap in the daily chart between the 28th and the 29th of November at the 334-335.5 area. This will be an interesting target when we get a correction.
Trading thoughts: My bullish trading idea will need some patience because we will need a trigger, and despite the new highs this trigger isn't in place. I don't consider breaking the 340 level the way it did as anything to get very excited about. But if we can get a pullback and then new highs, that would most certainly be something to be happy about, since it would set up a move that should at least target 354. That is the 0.618 the length of the move between June and August from the bottom on the 16th of November (I count the August peak as the top of that move). The next target would be 376, which happens to be in line with the bull market high of the bullish move since 2009.
AEX daily bullish set up,
With that said, I think that the market can continue its slow grind higher for a few more points. There are a couple of negatives to the picture that makes it very important to wait for a pullback and a break to new highs before going long, because the short term bearish scenario is still a real possibility. The coming pullback targets the gap at 334-335.5, which at this point would coincide with the 38.2 % retracement of the last leg higher. Too deep of a pullback would ignite the scenario below, which is also the reason I want to wait for the trigger.
AEX Bull Trap: