Dax Signals from RSI indicator

Dax Technical Analysis 05/06/2015

Hello Traders!

Volatility should return today with NFP to be released.

Today we have actually already pierced below the May low of 11163, however, the German index found its footing once yields and the Euro pulled back. Should NFP print much better than expected today, then the current oversold levels could offer a bullish opportunity moving forward. Bund yields have moved a lot and a big reversal in the Euro are helping it do so. Right now we hover around 11180 and are just threatening bulls by peering over ledge towards sub 11000.

There is a pretty good risk reward ratio setup at the moment, especially if you have a bullish outlook. We are currently at support and buying at support is not a bad strategy. At 11200, if we move back up to 11700 we take 500 points and we risk let’s say 100 points or 150 points if we get it wrong. A bearish setup could be to trade a break below support or short a rejection bounce of the first attempt to break support.

I suspect that we will be seeing a move one way or another today.

I would imagine there are a lot of stop losses around the 11100-11150 zone so it could take a couple of attempts to cut through on the way to lower levels. This fact may provide a few short-term trading opportunities, as a rejection of break lower may provide a bounce. I took a long at 11194 so I will sit on it and watch to see what happens.

If we do take out support and 11000 then I posted a few days ago a volume profile chart suggesting there is not a lot of support down to 10700.

Some alerts from the RSI indicator, using various settings on the different time frames.

Dax Signals from RSI indicator
Dax Signals from RSI indicator

The 4-hour chart still has the same setup as yesterday. A break lower looks more and more likely, but I refuse to short equity markets. So I will wait for an opportunity to go long.

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

I took a long at 11194 and stop loss around 11140, so I am speculating on a hold of support, not risking very much and aiming for a decent bounce. You can see the arrow cluster yesterday, I did a bit of short-term trading and managed to recoup a decent amount of my recent long swing trade loss. Good news!

Dax Intra-day Chart (5 minute)
Dax Intra-day Chart (5 minute)

Here is the volume profile again, the low volume pocket looks great for bears as if we take support out, there is not a lot more support down to 10800.

Dax Volume Profile Chart (5 minute)
Dax Volume Profile Chart (5 minute)