Italy’s FTSE MIB index dipped lower this week, as the Italian government quarantined its citizens against the coronavirus spreading through the country’s northern region.
Italy 40 analysis shows the index could stage its next major down move if price starts to trade below the key 15,350 support level.
Italy 40 medium-term price trend
The FTSE MIB continues to trade under intense downside pressure as fears increase of the rapid spread of the virus.
The index is trading down by close to 30 per cent from its 2020 price peak and is one of the worst performing indices among developed nations.
Italy 40 technical analysis shows that the index could face a technical meltdown if prices starts to trade below the 15,350 level.
The daily timeframe shows that if the price crosses below the 15,350 level then a bullish inverted head-and-shoulders pattern will be invalidated.
The invalidation of the bullish pattern could prompt a huge decline, as the pattern holds more than 9,000 points of downside potential.
Italy 40 short-term price trend
Italy 40 technical analysis shows that the index is heavily bearish over the short-term while price trades below the 23,500 level.
The four-hour timeframe is showing that a bearish breakout from falling wedge pattern has occurred, with the pattern reaching its full downside potential.
A large price gap has formed on the charts, following the recent heavy sell-off. A rally back towards the 20,600 level is needed to close the gap.
With this in mind, short-term sellers may use the pullback as an opportunity to enter back into the prevailing bearish trend.
It is noteworthy that a breakout below the December 2018 low, around the 17,960 level, could trigger the next round of short selling.
Italy 40 technical summary
Italy 40 technical analysis shows that a major bearish breakout will occur if the 15,350 support level is breached. A sustained move below this level could cause a drop of close to 9,000 points.