Dax Technical Analysis 02-08-2017

Dax Technical Analysis Outlook

The strong bullish day yesterday can be seen at the moment as a new month relief rally, with new money flowing in. The buyers are currently in control. The first targets were 12240 a previous POC, second target is just above the high of yesterday = Wednesday VPOC of 12300 and the third target is closer to the 400-440 zone. This represents a control area for the last month of trading.

As bulls continue to make progress they are leaving behind low volume nodes which could be filled during a pullback. Sellers may benefit from this and buyers can find better prices at that bottom of those areas, here they are: 1) 239-249 area 2) 214-224 area 3) 185-208 area. Mark them on the chart and watch a reaction.

The two hour opening range yesterday was broken to the upside which gave traders the first clue towards a bullish day. It doesn’t always work out that way, but yesterday it did. The best highlight was a retracement back to the opening range high, which became support, almost exactly the same level as vwap. So this confluence was an excellent entry (in hindsight)

Today, as I write this article, the opening range is still forming, however we have picked up plenty of action for the 8am London open and now the two hour range has broken to the downside.

Bearish Strategy

Assuming that this current bullish momentum is a relief rally and no more, sellers need to see buyer failure. This is because buyers will be looking to test the highs of yesterday and previous week, so if they can not break through the current range and run out of momentum, it’s time to turn around. Just be wary of traps if price breaks below the lows of the day.

We have an overhead resistance (trend) line capping price at the moment, based on a parallel from a significant previous bearish median line. A failure to break this could be an aggressive shorting opportunity.

Failure to break through 12300 is another setup

Reaching the previous week high may be a measured move for buyers, so once they are there, we may see selling as the trades are closed.


Bullish Strategy

We are currently in a bullish channel and have been since the lows of last week. We are overbought so buying from current levels is probably not the best strategy as we may be squeezed during a pullback. Due to the strength of the move higher, you would expect a decent pullback closer to 12200. In fact probably 175-200 as a zone would be interesting to look at a long, assuming the move continues higher.

The pullback to this zone may come in two or three legs/waves, so be aware the first pullback may not find the low. You want to see the sellers failing to break lower. Perhaps watch for divergence between price action and the oscillator.

Targets for the bullish strategies would be the recent high and the high from last week.

The strength of the move yesterday will now being questioned, because it needs to hold a pullback

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Dax Charts

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I am writing the article on a Mac and don’t have access to the server at the moment