Dax Technical Analysis 07/04/2017

Good morning traders!

US launched cruise missiles against targets in Syria, with about 60 tomahawk missiles fired towards a military airfield in near Homs. Donald Trump made the call after the use of deadly chemical weapons. So a risk averse tone has started after the strike with USDJPY losing over 50 pips within 2 minutes of the airstrike announcement and the traditional safe-haven of gold rose to a 5-month high. It’s difficult to say how long this bearish tone will last, but it seems that buying the Dax or any stocks and shares today, may not yet be the best idea.

So it seems the algo has found its weakness, technically it still wants to be bullish, but with the geopolitical landscape looking a lot less encouraging, I think it is prudent to overrule the bullish bias for now.

The Dax gained 0.37% yesterday, retracing just under half of the losses sustained on Wednesday. We pierced the low from Wednesday, finding 12115, which was almost exactly the target I had been looking for from the Fibonacci extension study. Price started to recover from there, offering a decent bullish opportunity to buy at support. However, the bombing in the early hours of this morning has been the key factor of market behaviour today.

The Bearish Case

The global tensions and military action are providing the right conditions for selling the market. We have already created a double top at the all-time high after being stretched long, so a retracement is inevitable. 12110 is a major level to break, but the support zone is 12075-12110, so it needs to be a significant move. Draw a trend line from the highs at the beginning of April and follow the lower highs and you will see price respecting those levels as it prints what seems to be a downtrend, short-term. Pull up an hourly chart, put a 26 period RSI on it and have a look at what the oscillator is doing around the 50 line. The RSI is in a downtrend and is struggling to break the 50 line, this could be considered as a bearish signal. Finally, take a look at where price is, relative to the 200-day moving average. Put a 200 period Bollinger band on there with 2 standard deviations and see where the price has been trading. We’re at the top of the band.

Could reach 12191 offering a selling opportunity. A break below 12110 is interesting.

The Bullish Case

We still are in a period of easy monetary policy and it is yet to break the all-time high. We have been in a bullish trend since the end of November, so this current selling activity is just a retracement. We are technically bullish above 11875 and it is expected for price to hold 12000, so whilst it’s falling at the moment, it will provide an opportunity to buy at a better price. Keep your powder dry for now. Short-term we are reaching the bottom of the Bollinger band on the 5 mibute chart, so watch for bullish divergence below the bands.

Could reach 12075 and offer a buying opportunity.

It seems that the bearish case is in the lead today.

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Dax Support & Resistance

14 Day ATR122.59
Daily R212321
Daily R112270
Daily Pivot12192
Daily S112142
Daily S212063
200 Day EMA11210

Dax Charts

05 Dax m5 Chart
05 Dax m5 Chart
03 H1 Dax Chart
03 H1 Dax Chart