Dax Technical Analysis 27/02/2017

Good morning traders!

Can you believe that we are at the end of February already?! Maybe it’s because I am getting older, maybe it’s because I have been flat out and manic-busy with everything so far this year, who knows, but I am staggered with the speed at which 2017 is disappearing. I hope you all had a good weekend, my highlights included some pretty competitive go-karting (great fun), football (United won the EFL cup), Rugby (England beat Italy to make it 17 straight wins) and a walk around the windy Purbeck coast path learning the history of “little London by the sea”.

Are German blue chips looking more promising to funds and wealth managers? European stocks have lagged behind Wall street for the last few years and many institutions believe this year will see the tables turn. There has been plenty of political uncertainty and turbulence in the markets, but yet the Dax has weathered-the-storm quite well and may appear ripe for trading. There will likely be further volatility, especially with the French and German elections on the horizon, but perhaps these are buying opportunities. The Dax is currently trading around 13 times forward earnings and trades at a discount to its average, so when you factor in that the German economy is considered a European safe haven, the prospects look quite appealing for the bulls.

So I am still bullish. I got spanked a bit on Thursday and Friday last week with three failed long trades and having my FXCM system timeout three or four times on attempted buys, that would have worked out well. It’s frustrating when it happens, but this line of work is frustrating. So after a few tweaks, I am ready to get back involved again and will be trading Dax, SPX, Gold and Forex. Last week my forex (Gold only) signals earned +419 pips and I have a new system being forward tested now which has also been performing equally well. I have a new SPX system that is also being forward tested and this has been out-performing forex, but it’s too early to be conclusive at the moment. So there are some great things happening behind the scenes at DaxTrader and I will be delighted to share them soon.

[success]I am still bullish and looking for opportunities to buy.[/success]

 

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Dax Daily Chart

The daily candle from Friday began to look deadly half way through the session Friday, it looked heavy, it looked bearish, it looked like it was about to start a reversal to the downside, the second half of the session recovered around 50% of the losses and ensured that we had a bullish week overall. Although take a look at the weekly candle and make your own conclusions. It’s certainly relieved quite a lot of the pressure that the bullish wave was beginning to cause.

There are the durable goods orders from the US today and inflation report hearings from the UK to watch out for in terms of high impact news, but a relatively quiet first half of the week other than that.

01 Dax Daily Chart
01 Dax Daily Chart

Dax Hourly Chart

Last week I was looking at bullish targets based on a Fibonacci extension which was plotted around 12070, an area of previous resistance from 2015. The price was rejected before reaching this level and my first thoughts were that the 11875 level would provide support, but it did not. The sell-off was quick and it was sharp finding support much lower down, around 11720, a few points above the support lines we have been working with for the last week or two.

If you like using divergences, you will spot one here (hidden divergence).

03 H1 Dax Chart
03 H1 Dax Chart

Dax Intra-day Chart

This chart was interesting because we mentioned that a break below the Bollinger band would offer an opportunity to go long to revert back to the mean. When you combine that signal with bullish divergence, it provides a much higher probability setup than either signal on its own. I will look into building an indicator for that because it looks good.

Our premium signals still have a trade open based on this signal, or something similar.

05 Dax m5 Chart
05 Dax m5 Chart

Dax Support & Resistance

KEY LEVELS
Daily R212081
Daily R111957
Daily Pivot11838
Daily S111715
Daily S211596
200 Day EMA10916

 

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