What’s inside:
- DAX holding onto support
- Choppy price action making it difficult to arrive at conclusions
- Favoring entries on pullbacks in light of weak momentum
What’s driving European equity markets? Find out in our trading guides.
On Thursday, regarding the DAX, we expressed our view that while the bullish tone was dented it remains supported. The failed breakout from the multi-week ascending wedge and trade back to the bottom-side of the formation put the index perilously close to a breakdown. Friday was a close one, but the market managed to hold on into today.
Generally, price action has become choppy, thus making it difficult to arrive at any concrete conclusions. Keeping it simple, as long as the DAX doesn’t experience a strong ‘sell-day’ through the lower trend-line extending higher from the April 24 French election gap the market will remain supported. The December trend-line just below the election trend-line is viewed with less significance even though it is longer-term in nature, simply because it has few connecting points (December/April). For the bias to fully shift lower a break below the gap trend-line and 6/15 low at 12621 would need to develop. But until then the market outlook remains neutral to bullish in-line with the overall trend.
Looking higher, the first obvious level of resistance is the gap-day high at 12951, then beyond there the top-side trend-line dating back to February.
Given that momentum is lacking, the best trading approach at this time is to enter on pullbacks versus chasing price action. This is most often times our chosen approach, but in times of low volatility and choppy trading conditions it becomes even more imperative that we take a disciplined approach which focuses on getting good prices over trying to catch large extended moves.
DAX: Daily
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—Written by Paul Robinson, Market Analyst
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