CDNX Chart Update

The CDNX is performing as expected and the outlook for this market over the final 4 months of the year is very positive – a new 52-week high by year-end is a strong possibility.  The CDNX overcame significant resistance at 1500 this week without much difficulty and now the next test is 1550 where John has identified another band of resistance as he explains below:

Yesterday the CDNX again showed significant strength by surging nearly 14 points on the second highest volume since mid-May.   It opened at 1521, drifted lower to 1518, and then rose steadily to a high of 1533 before closing at 1531.   This indeed was a show of strength.

Looking at the 3-month daily chart there was a bullish reversal on July 20 and a new bullish uptrend wave started.  This first wave is called the Fibonacci seed wave and is normally between 8 and 13 trading sessions long from the reversal to the peak.  This one is exactly 13 at the moment.  This wave is considered to be from 0% to 100% as shown and the extension to the 161.8% gives the Fibonacci target level which is 1546.   There is significant resistance at the 1550 level (not possible to show on this chart), thus the CDNX can expect to meet a resistance band between 1546 and 1550.

Please note that when the Index meets a resistance band it does not mean it will necessarily retrace very much –  it means you can expect it to take time to work though this band.  The uptrend can still be intact.   The daily SMA(20) provides solid support and keep in mind if the Index level gets too far away from this moving average it will retrace towards it.

From Aug 12 the average daily volume has been increasing, demonstrating the strengthening interest in the CDNX market.

Looking at the indicators:

The RSI shows it is just entering the overbought region but there is plenty of room for the CDNX to move up before the overbought peaks.

The Slow Stochastics shows that both the %K and %D lines are high in the overbought area and have been for most of the last 5 weeks.  This is because the CDNX is strong at the moment and usually closes near its high for the day. This will not cause a problem at the present time.

The Chaikin Money Flow (CMF) indicator is green, showing a bullish level of buying power and the steady decline in buying pressure from Aug 6 is primarily due to seasonal effects and should increase again after the Labour Day long weekend.

Outlook: The CDNX is very strong right now but a pause at 1550 as it meets a resistance band can be expected.  The downside is quite limited.  We can, I believe, look forward to a continuing uptrend through the end of the year.