What’s inside:
- DAX working towards apex of a triangle below critical resistance
- Continuation-trade lower looks the likely scenario; key support levels outlined
- A strong close into the mid-12300s required to negate bearish outlook
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The DAX continues to remain one of the weakest global indices, as pressure from a strong euro continues and global appetite for stocks is fairly neutral at the time-being. Last month, the DAX triggered a bearish ‘head-and-shoulders’ pattern, but it has yet to garner much downward momentum.
That could soon change with the development of a triangle coming further and further into view with each passing day. Today, we are seeing some weakness to the underside of the maturing pattern; there isn’t but perhaps a few days left until price reaches the apex of the formation. It could break at any time.
In the event of breakdown, the 200-day arrives just a few points above the 12k mark. It could give the market some support, but if the topping HS formation and broken wedge are to exert their forces then it may prove to be a speedbump at best on the way lower.
Significant price support to watch comes in at 11935, 11850 (to a lesser degree), then 11484. The measured move target of the ‘head-and-shoulders’ formation arrives near 11600, but is a projected target – preference is towards actual levels of support/resistance.
The triangle could always trigger to the top-side and end the slide since June. It would be against the trend and given the strong resistance surrounding 12300, traders would want to be careful until we see a strong close above ~12340; then the bias could quickly go from negative to positive.
DAX: Daily
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—Written by Paul Robinson, Market Analyst
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