Bullish Menage a Trois in the French Market

• Posted by Greg Harmon
• on March 13th, 2013

I have told many people about my time at BNP Paribas. It was an interesting place to work and my only experience being in the satellite office of a company where I was not from the home office. BNP Paribas was the premier Equities Derivatives house at that time, with just about every French trader there holding some kind of degree in Math or Engineering from the right University in Paris. They were very technical traders and precise. When I tell stories, the comparison between the French and American traders always comes up. I sum it up simply. The French are very technical and precise traders. If a price does not hit their level to the penny they do not trade. The Americans on the other hand would see the same set up, but take more trades and were more profitable. That was because they adapted to the situation. If a stock reversed near their target they jumped in and rode it higher.

So when I look at the French stock market it is no surprise to me that it has been following at least 3 technical patterns that point higher to between 3900 and 4000 on the CAC 40 Index ($CAC, $EWQ). The daily chart above highlights each pattern. First there is a AB=CD pattern playing out since June 2012. This carries a target of 4000 in short order. Next, notice the Diamond in the middle of the chart. It formed after a rise from 2950 and the move higher carries a target of 3950 out of it. Finally the ‘W’ at the far right has a target of 3900 on the break of the current consolidation over the top of the ‘W’. These are all support by technical indicators that point higher. The Relative Strength Index (RSI) is bullish and rising and both the signal line and the histogram on the Moving Average Convergence Divergence indicator (MACD) are running higher. A French traders dream. Grab some brie and a baguette and enjoy!

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