May 2, 2023
CAC 40 forms a double-top as LVMH, Hermes, Kering stocks rallies
The CAC 40, the benchmark index of the French stock market, has formed a double-top pattern as the stocks of luxury goods companies LVMH, Hermes, and Kering rallied in recent weeks.
A double-top pattern is a technical chart pattern that signals a potential reversal of an uptrend. It occurs when the price of an asset reaches a high level twice, but fails to break through it, and then falls below a support level.
In the case of the CAC 40, the index reached a high of 6,422 points in September 2020, then again in February 2021, but failed to break through that level. The index has since fallen below the support level of 5,900 points, indicating a potential reversal of the uptrend.
The rally in the stocks of LVMH, Hermes, and Kering, which are all listed on the CAC 40, has been driven by strong demand for luxury goods in China and other emerging markets, as well as a rebound in the global economy.
LVMH, the world's largest luxury goods company, reported a 32% increase in revenue in the first quarter of 2021, driven by strong sales of its fashion and leather goods division, which includes brands such as Louis Vuitton and Dior.
Hermes, known for its iconic Birkin bags, reported a 44% increase in sales in the first quarter of 2021, driven by strong demand in Asia and the Americas.
Kering, which owns brands such as Gucci, Saint Laurent, and Bottega Veneta, reported a 26% increase in revenue in the first quarter of 2021, driven by strong sales in Asia and North America.
Despite the strong performance of these luxury goods companies, the double-top pattern in the CAC 40 suggests that investors may be becoming cautious about the overall market. The pattern is often seen as a sign of indecision and can lead to a period of consolidation or a downward trend.
Investors should keep a close eye on the CAC 40 and the performance of luxury goods companies in the coming weeks to see if the double-top pattern is confirmed and if a reversal of the uptrend is underway.