What’s inside:DAX stalls, looks headed lower near-term on break of support Decline still healthy unless we see aggressive downside price action, bias will change then Technical levels outlined
The title of Wednesday’s post was, “DAX Gearing Up for New Highs”. Not so fast. The market since that morning has been ‘soft-ish’, but nothing to get overly concerned with just yet. The short-term chart (hourly) suggests more downside could come if the market can’t soon bounce, but there is trend-line support not far below on the daily should sellers arrive.
A head-and-shoulder-ish pattern, or possibly a descending wedge could come into play real soon. The H&S formation has a weak right shoulder; the symmetry isn’t the best but still qualifies in our book as a valid formation. A clean break below 11725 exposes the downside regardless of what you want to call the configuration – H&S, wedge, or any other name you want to give it. We will look to the trend-line rising up from December and gap-fill from 2/13 at 11665 as the next levels of support on a break. However, if support holds and we see a pop higher, then bearish bets are off and we’ll have to start looking upward.
An aggressive break lower and undercut of the trend-line extending back to early December would be of concern for wagers from the long-side looking out beyond the very short-term. For now, though, global risk appetite continues to remain buoyed, and until we see aggressive price action lower we will run with the notion of weakness being nothing more than a healthy pullback for what could later be the DAX gearing up for new highs.
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—Written by Paul Robinson, Market Analyst
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