Good morning traders!
Yet more pressure is being applied to the Dax at the moment, once again attributed to the Brexit uncertainty, with yet more polls being published suggesting that the leave campaign has taken the lead. With this kind of uncertainty we have really good conditions for selling. We are continually breaking below various support levels and as I mentioned yesterday, the next major level is close to 9500 and beyond that 93xx.
There are a lot of bulls who are expecting a bounce today, believing that as we have lost 700 points, it can’t continue going down, but the fact is it could. There has been a slump in government bond yields, investors are jittery about Brexit and central bank meeting and these issues will likely dominate in the short term and we are in a risk off situation. There will likely be a good retracement or reversal trade soon, but we need to see a catalyst to reverse the momentum, perhaps a poll suggesting a massive swing in the Brexit campaign, or some kind of high profile error from the leave campaign.
Today we have UK CPI and US retail sales which can make some waves in the market, but Brexit clearly still dominates.
I didn’t personally trade at all yesterday, so there were no signals released, but I am currently short right now and as I write this article, the UK market has just opened, we have just taken out the daily low. (I closed my short for a profit). A good way to trade the Dax could be to wait for the pullback, we have to have one at some point, it’s just what markets tend to do and we could see a couple of days of bullish momentum to squeeze the traders that have jumped on this bearish move late. Once the market gives back some of those losses, it could offer another good opportunity to short again. So yes we can continue to move further down and reach the 9450 level very soon, but traders chasing that trade could get caught on the wrong side with a poor risk to reward setup.
I am going to watch the 9750 level as a possible short and if we take that out during a pullback, then another level I will be watching is around 9912.
Dax Support & Resistance
|200 Day EMA||10134|