Dax Technical Analysis 13/03/2017

Good morning traders!

With a 235k NFP on Friday, the rate hike expectations almost seem certain. This week we will have the decision, I suspect that the recent USD rally is as a result of ‘buying the hype’, I expect for there to be a retracement soon as people ‘sell the fact’. It’s almost like a no win situation for the USD at the moment, because regardless of how strong the interest rates are, or how well the economy is doing, or how much demand there is for the currency, the Trump administration will want to weaken the dollar to improve its competitive edge in the global market. However I expect many traders, perhaps novice traders, to get carried away by the rate hike, they will jump on board with a trade, probably be over-leveraged, go long, and then wonder what happened when it turns around. I am just speculating, not predicting, but so often the reverse of what retails traders expects actually happens.

Oil continues to find lows with a supply glut still showing little sign of slowing as US inventories increase for the 9th week I believe. Many people (including myself) have been trapped on the wrong side of EUR trades after the ECB discussed hiking interest rates before the end of QE. Does this mean that EUR is becoming a stronger currency? No, in my opinion absolutely not. The Euro as a project seems destined to find continued problems, for example during the next failed Greece bailout issue (on the horizon already), Brexit, France, Italy, potentially Germany saying they’ve had enough, where should we stop… So long term, this will likely just appear as a mini relief rally, I may be wrong.

Regarding the Dax, we have retraced nicely from the recent rally but have found support around 11915-11930. A break below this will open up the doors to 11710, however, if this area holds again, it will strengthen the support and allow us to take on the yearly highs once more. This week, watch out for the FOMC.


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Here is a list of the trades from the Dax algo on Friday, only a couple of trades (one was opened Thursday):
The Trading Exchange, [10.03.17 07:00] CLOSE DAYTRADE BUY #GER30 @ 12012.25 | PROFIT: 58.63 PIPS | 2017.03.10 07:00 (GMT) | ID 61348871

The Trading Exchange, [10.03.17 08:05] DAYTRADE BUY #GER30 @ 12022.34 | SL:11994.75 | TP:12087.86 | 2017.03.10 08:05 (GMT) | ID 61362934

The Trading Exchange, [10.03.17 10:02] CLOSE DAYTRADE BUY #GER30 @ 12044.35 | PROFIT: 21.10 PIPS | 2017.03.10 10:02 (GMT) | ID 61362934

Dax Daily Chart

The last three consecutive daily candles have shown wicks suggesting that selling pressure is beginning to strengthen and the price is struggling to break resistance at 12075, a key level since 2015. There is also bearish divergence marked on the chart as well, which adds to the signal.

Selling from current levels would need a large stop loss and targets would be around 11700, which I suspect will hold, so the reward to risk ratio is not great from a swing trade perspective. The technical trend is bullish above 11700, my algo is bullish (looking for small bullish trades, intraday), but I am personally thinking of taking a short-term bearish stance looking at this chart, considering the current, probably short-term, Euro strength. Euro strength can sometimes indicate Dax weakness.

01 Dax Daily Chart
01 Dax Daily Chart

Dax Hourly Chart

We have support between 11915-11940 which has been a good buying opportunity over the last week or so. This week that area is likely to be tested again. If it breaks, it opens up the door to 11875 and a significant break below that opens up 11700.

No clear signals on this chart right now.

03 H1 Dax Chart
03 H1 Dax Chart

Dax Intraday Chart

Triple bearish divergence above the Bollinger band (the Bollinger band I am using is 50,2 based on hourly data, printed on a five minute chart – great indicator) and I been studying this indicator with divergence, I like this combination of indicators so much I have coded a MetaTrader4 indicator for it to provide alerts and I will be building an automated trading system from it as well. I suspect many signals will be generated from this indicator, and it works in all markets. It will be available for sale for just £3,450,499.99, a bargain! That’s under 3.4505 million pounds!

But seriously, here’s another great example of it working out nicely. The bullish divergence that happened in the afternoon session would have been a good exit.

05 Dax m5 Chart
05 Dax m5 Chart

Dax Support & Resistance

Daily R212121
Daily R112040
Daily Pivot11986
Daily S111905
Daily S211851
200 Day EMA11017