It doesn’t take a rocket scientist to figure out what would happen if the CDNX were to blast through significant resistance around 1500. That would be an extremely important market development with very bullish implications, and we believe there’s a good chance it’s going to happen – the only question is how soon. BMR’s technical analyst takes a detailed look at what’s been happening recently with the CDNX:
John: The CDNX continued its bullish ways Friday by opening at 1462, drifting lower to 1458 and closing near the high of the day at 1466. Other North American markets, with the exception of the TSX, finished in the red. The CDNX is having a remarkable run with only one down session in the last 13.
Looking at the 6-month daily chart we see that the support (green horizontal line) at 1347 has held and that the CDNX has broken through the previously identified resistance level at 1445, a very bullish sign. This market is on the move.
I have included the line chart of Gold (continuous contract) for comparitive purposes.
We see that starting on July 20 (thin vertical blue line) the CDNX made its first move to the upside and continued to do so for the following 4 sessions with the price of Gold falling during that period (a bullish divergence we’ve seen before). Then, on July 27, Gold reached a 3-month low (thin vertical blue line) and that date was the first time Gold had an affect on the CDNX (closed lower) during that short period. You can also see that the Bollinger Bands (BB) were moving up in parallel (same level of volatility) until Gold started to increase in price at which point the BB widened and Gold and the CDNX have continued to rise in tandem.
The chart also shows a resistance band (2 horizontal blue lines). This is the next first major resistance I expect the CDNX to encounter.
Looking at the indicators:
We see that the RSI has been climbing steadily, indicating smooth constant strength, but it has not reached the overbought region – very bullish.
The ADX trend indicator has the +DI (green line) above the -DI (red line) and climbing. The ADX (black line) trend strength indicator has turned up to show that the bullish trend is strengthening. Also note that the +DI crossed up over the -DI at the same time that the price of Gold reversed (thin vertical line).
Outlook: The CDNX should be able to continue to climb to the 1490 (resistance band) without much trouble. With Gold expected to continue to perform well, there’s a good chance the resistance band can be overcome. We shall see.