Dax Technical Analysis 27/03/2017

Hello traders!

Getting straight to the point and ignoring most of the news from over the weekend (except the news that Trump clearly is performing TERRIBLY right now and failing miserably at being US president, as expected – the healthcare bill was an epic fail). At some point, he will probably ‘pull his finger out’ and actually deliver something useful, perhaps even deliver on some of his promises, basically, do his job. And to believe that this level of incompetence was actually voted for, by a majority, sad times indeed.

The Dax opened with weakness after the weekend, which shares inverse correlation with the EURUSD which is rallying up to yearly highs and putting a tremendous squeeze on any short positions (and there are many traders currently in that position – all probably wondering whether to just cut it and take the loss). The pair is currently looking to pass a critical level, a level that was supported in Oct 2016.

As for the Dax, we ended the week pretty much where we started after threatening to break too much lower levels, the result is a long-tailed doji candle on the weekly chart, which could be seen as a rejection candle, a bullish signal. However we have started the week quite bearish, so I will be watching out for a break below the low from last week. If this price action pattern is a repeat of the mid-January  2016 moves, we could see a retracement back to the 11500 support, before a move higher.

The current daily candle has already engulfed price action from Friday and is currently testing the low from Thursday last week and is down around 120 points on the day, in line with the rally on EURUSD (inverse correlation). It seems that price is looking to test the 11875 level again.

Given the Euro strength and the Dollar and SPX weakness right now it’s very easy to say that we should be bearish on the Dax, and you’d be forgiven for that. However, the algorithm I am using is still looking for buying spots. It has not quite switched to neutral just yet.

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Dax Intraday Chart

A nice reaction to the top of the band here and we have cut through all the daily pivot support levels, trading between the S2 and S3 as the US session begins to take over. Let’s see what happens, I would be surprised if we continue to slide lower for the rest of the session, but the Dax can often surprise. I would expect the daily S3 to hold price if we do manage to fall that far during the day offering an intraday opportunity to buy.

05 Dax m5 Chart
05 Dax m5 Chart

2 thoughts on “Dax Technical Analysis 27/03/2017

  1. Thank you very much indeed for your valuable analysis. What do you think about the effect of Brexit on Dax? What do you expect?
    Thank you very much indeed

    • I think this is a question that could be answered in a 10,000 word thesis, but a quick summarised ‘off-the-cuff’ answer would be: brexit is not just going to be a single news release, which will affect the market only once, there will be a prolonged period of uncertainty and volatility which will have the same impact on the markets as a high impact news release. I believe that there will be waves of uncertainty, followed by waves of relief. Long-term growth prospects for Germany will always be stronger than most countries. They are an important engineering, manufacturing and exporting country. The trading relationship with the UK will not be massively affected (in my opinion). We will still trade together, so long-term, I don’t see many issues. In the short-term, during the next 2 years, we will have interesting moves.

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