Dax Technical Analysis 23/02/2017

Hello Traders

In the article yesterday I had a concern that the market appeared to be showing signs of exhaustion at the psychological 12k level and that there was a bearish candle formation developing with a doji at the top of a large trending move (8 am on the hourly chart). 12030 is currently the high of that move and price remained below that for the rest of the session and has remained below that this morning.

I think the main reasons for the gains lately has been down to the Euro pulling back and German business climate exceeding expectations and this has allowed the Dax close some of the gaps between itself and the US counterparts. Recent EU numbers have been quite good, with inflation moving in the right direction, but the ECB has little appetite to taper the QE program just yet. There is still uncertainty (politically), especially with France, Holland and Germany having polls later this year. Watch out for the FOMC minutes today to get some more dollar steer. The Fed pressed the hike button in December and expectations have been for there to be more than one hike this year, with the second hike soon set to happen “fairly soon”. So let’s see.

Regarding trades, I currently have no Dax position. I went long USOil (Gold trade) @ 53.64 which is doing well and I have positions on USDCAD, EURCHF and GBPCHF too. This week we are up around +250 pips (excluding the current open trades). I will be offering a promotion for Gold in March. Let’s take a look at the charts, after this quick announcement below.


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Dax Daily Chart

We hit the 12k level again, yet another yearly high. The Dax managed to post a small gain yesterday, but it was hardly convincing, however, take into consideration the previous week or two and you can understand why. If we stay under the high from yesterday, then we could see a little pullback offering a chance to add to longs. The 200 day EMA is approaching 11,000 for the first time since August/Sept 2015 and it didn’t stay there for long last time.

Strong momentum still favouring the bulls who are looking for the Dax to reach all time highs.

01 Dax Daily Chart
01 Dax Daily Chart

Dax Hourly Chart

11875 is still an interesting level because I believe at some point we will come back to test that. So I drew a crude prediction (below). I’ve drawn a Fibonacci extension from the 7th/15th/17th Feb peaks which gives a 100% extension target of approximately 12070, which is similar to the horizontal support/resistance level I mentioned yesterday, it there is some confluence. If this level causes a rejection in the short term, then a pullback to 11875 would be my best guess, to test the previous resistance which becomes support, then on we go to the next level of resistance.

By all means, we could just continue climbing higher, but it seemed a logical path to me. But is the Dax logical?!

03 H1 Dax Chart
03 H1 Dax Chart

Dax Intra-Day Chart

We spent some time hugging the bands, in need of a pullback and the sideways price action from yesterday has allowed us to move back towards a climbing mean. We are back inside the bands, albeit through default, but it relieves some of the bearish pressure that was beginning to build. We are currently around the daily pivot (at the time of writing) and these levels still support the case above, although a pullback to 11875 would mean a break below the 50-hour EMA and a move down to the daily S3. So if the pullback were to happen, perhaps it will take a few days?

05 Dax m5 Chart
05 Dax m5 Chart

Dax Support & Resistance

Daily R212065
Daily R112034
Daily Pivot12000
Daily S111969
Daily S211936
200 Day EMA10898