3Dax Intra-day Chart (4 hour)

Dax Technical Analysis 04/06/2015

Good morning traders!

German 10 yr yields are pressing firmly on the Dax at the moment, it seems the deflation risk is waning and Eurozone is close to growing. So this is a big sign of a potential change in risk trends and weighing on equities.

This morning we have made our clearest sign yet that the 11150 is under pressure and about to go and we have now already reached the daily S2 before 10am. When trading short term, I like to trade the bounces from these levels. The 11150 is so important because it is the 10% correction area and we have recently been here once before, so we are either going to create a double bottom and move higher from here, or we break through this zone and open up a much wider reversal and give back some of the massive gains that we have made this year.

What’s causing the sell off? Most of this is simply a waiting game, buyers are sitting out and wanting to see confirmation on a deal with Greece as there was a lack of agreement from that night. Stronger Euro. Utilities are affecting the markets due to Germany’s nuclear tax ruling. European equity expectations fall as bond yields begin to rise, despite Draghi vowing to “keep the tap open” regards the QE programme. Lots of factors having their influence out there.

So my previous long trades are nearly all closed out and that has been a hit, but I still won’t short the market. I took a few longs from the daily R2 this morning and gained back over half of my recent loss. But this was just a predatory trade, I won’t get greedy and I will stay patient and watch.

So what can we look out for?

On the four hour chart we can see bullish divergence on the RSI, which is a possible bullish signal.

3Dax Intra-day Chart (4 hour)
Dax Intra-day Chart (4 hour)

On the daily chart we risk break out of the range to the downside or a bounce from the previous low and 10% correction level.

2Dax Daily Chart
Dax Daily Chart

A break below the 11140 level could open the zone 10700-10800 zone which represents a number of fib zones. A break above 11500 could open up a move towards the recent highs of 11900. It seems the probability favours the short side, at least until Friday.

3Dax Intra-day Chart (4 hour)
3Dax Intra-day Chart (4 hour)

We are currently hovering around the weekly S1 and we want to look for a reaction here. Volume is rising so it’s possible we see a short-term bounce, but the pressure will still be on to the downside.

3Dax Intra-day Chart (4 hour)
3Dax Intra-day Chart (4 hour)

These are a few Dax screens using the RSI indicator with alert. I have used different RSI settings on the charts just to show how the signals look, for example on the top right chart (4-hour) I have used bullish settings to generation buying signals, but on the bottom left I have used the bearish settings to generate sell signals.

 

RSI Indicator With Alerts
RSI Indicator With Alerts