Dax Technical Analysis 02/03/2017

Good morning traders!

US interest rates are a pretty common discussion point among speculators the moment and of course, it is one of the largest fundamental catalysts for the most popularly traded currency. More Fed members are suggesting a hike is due, if not this time round, then probably next time. Donald Trump is an equally popular discussion point, but perhaps not for the best reasons. Speculators are trying to predict what may happen if 1. his policies are enforced and work/don’t work 2. he loses the will to live and walks away from the job 3. he gets impeached. Clearly, there will be large implications for the inflated markets if he is no longer around to deliver on his fiscal “promises”, but even if he does successfully press the reset button and he begins to win people around again, can he actually deliver what he has promised? The next discussion point is the strengthening dollar vs Trump’s belief that a strong dollar is not good for business, so it’s likely his team will talk the dollar down as it climbs. For now, keep an ear our for Janet Yellen’s clues.

My algorithm is still bullish, which means we could get buying signals at the top of the market and continued buying signals on the way down if we get a reversal. That’s the risk of a momentum, trend-based system. On the other hand, we are going to get excellent buying opportunities and good entries to add to our position. SPX reaches record highs again taking out 2400 yesterday and DOW reached new highs as well. The Dax still continues to trail behind its highs but we saw an excellent day for bulls, closing above 12,000 for the first time since April 2015. Gold has pulled back, but let’s take a look at the charts.


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Daily Dax Chart

The bullish technical trend continues as we post another higher high, this trend is really strong at the moment and currently not showing too many worrying bearish signals. Risk reward opportunities up here are always difficult to find, it seems wrong to buy at the highs, but the Dax momentum is strong.

The trend defining level is 11700, and interesting levels for bulls would be 11850-11875.

01 Dax Daily Chart
01 Dax Daily Chart

Dax Hourly Chart

We reached the 12075 level that was marked out as being the 100% extension target from a previous move discussed last week. We have not seen a sell signal just yet, but the market is overbought and profit taking from this level would not be surprising. A significant break above 12075 can open the door to the next level which is 12190.

11860-11900 is the retracement zone from the most recent wave higher, although the Dax does not tend to retrace in the same way as a forex pair. I am watching 12000 as potential support.

03 H1 Dax Chart
03 H1 Dax Chart

Dax Intra-day Chart

The upper Bollinger band has been broken as price returns to within the 2 standard deviations of the 50 period hourly EMA (which is plotted on this 5-minute chart), suggesting that price is reverting back to the mean and relieving some of the overbought pressure. The 50 hour EMA is approximately sitting around the daily S1 (pivot point indicator) and the daily pivot is around 12000.

Buying opportunities are not great value from current levels, but we could get better risk reward from somewhere between the S1 and daily pivot.

05 Dax m5 Chart
05 Dax m5 Chart

Dax Support & Resistance

Daily R212272
Daily R112172
Daily Pivot12000
Daily S111900
Daily S211728
200 Day EMA10948