Dax Technical Analysis 08/02/2017

Good morning traders!

Deutsche bank are at it again, Boaz Schwartz, head of the German bank’s Israel unit, was detained over allegations of tax fraud and the company are being sued again. I fear for that bank. It’s possible that this is having an effect on the Dax at the moment.

I have been watching out for volume spikes on the Dax, to perhaps indicate when the buyers are moving back into the market. This morning, on the hourly chart, I can see we have had one of the largest spikes this year between 8am-9am. I accept that the chart is based on FXCM data and at the moment, the integrity of FXCM is being pulled into question, so how trustworthy is it, but it’s still apparent that more volume is being traded. I would be interested to see if the same spike appears tomorrow. Surely I am not possibly suggesting that they go in and edit the data overnight. That would be libellous…

Dax Technical Analysis

Looking on the daily chart, yesterday we pierced the Monday low but closed blue after a mini retracement. We are clearly bearish below 11900, and a break below 11400 will be the next significant milestone for the bears. A clear break through this level opens up a move back towards 10800-11000 area. If the 11400 level holds, then this will likely be the buying zone for bulls and price can continue to build back towards yearly highs again. The economy in Germany is still strong (despite Deutsche Bank) and the Dax is merely a barometer of its strength. You could still argue that there is value in this market, as a buyer.

Currently at 11565, buying from here would mean a stop loss below 11400 and a target 11750 or 11900, the probability is certainly not great, so it may not be quite as attractive a trade.

01 Dax Daily Chart
01 Dax Daily Chart

The hourly chart still displays the rising channel/horizontal channel break from Monday, but more importantly, it now shows that volume spike. Now it’s recorded, let’s check again tomorrow. I have marked out a fib level at around 11498, this was part of a Fibonacci extension which use three points (26/1 high, 31/1 low, 1/2 high) to predict the next move. An extension is said to have completed its move when it reaches 100%, currently, it has stalled around the 61.8% extension.

I have also just noticed that we have bullish divergence on this chart, but I did not mark it. Can you see it? I have an order out there right now.

03 H1 Dax Chart
03 H1 Dax Chart

I lost a trade yesterday. I sent this one out to the group:

DAYTRADE SELL #GER30 @ 11582.55  |  SL:11605.00  |  TP:0.00  |  2017.02.07 12:04 (GMT)  with a 25 point trailing stop loss (therefore no target). I won’t complain too much, but it was stopped out by a single point before going on to complete a decent move. Frustrating, but that’s variance in trading and it happens.

The name of the game is to get into high probability setups, set your levels according to your risk tolerance and then if you get stopped out, so be it, nothing is guaranteed, there will always be variance in trading. Ask yourself would you make the same trade again if a similar opportunity came along, if yes, then it’s variance. If not, then perhaps there is a leak in the analysis, learn from it, plug the leak, and move on. It’s like playing poker. You can have AA against your opponent, and even if you both go all in before the flop, and you have the best possible starting hand you can receive, you are only 85% favourite against a random hand. If the hand loses, it’s variance. Because you’d do it again in a heartbeat. You played the hand correctly, you have +EV (positive expected value), it just didn’t work out, but over time it will because high probability setups have a high expected value.

In trading an AA is the equivalent of a perfect signal, we don’t get them often, so instead we have to deal with more marginal signals, meaning the probability of success is lower. Traders who can not accept variance in their trading, are probably over-leveraging.

05 Dax m5 Chart
05 Dax m5 Chart

Dax Support & Resistance

Daily R211686
Daily R111622
Daily Pivot11543
Daily S111478
Daily S211399
200 Day EMA10790