The German 30 (DAX) Index has increased as much as 18% over the last 34 trading sessions. Forming a low on March 15th at 6,413 we can see a trend line developing and being tested first on April 18th. As the trend gains in strength, we can stand vigilant as price again tests support to confirm our trend.
Over the last week we have seen a selloff of the German30. Recent declines have been attributed to missed earnings and even disruptions in Libya. However, with the ECB (European Central Bank) confirming this morning that key Interest rates will remain at 1.25%, stocks have rallied. The general consensus is that cheap lending will remain at least until next month. With no major changes in policy, we can look for the trend at least temporarily to resume.
Moving price to a 4Hr chart we can see price approaching short term support. Generally speaking, the second test of a trend line is critical in any developing move. Buyers can look to enter in the direction of the trend near support using CCI or an oscillator of your choice for confirmation. If the trend fails to hold, it would put the GER30 in a breakout scenario with a possible move to support near 7,240.
My preference is to look for buying opportunities as close to the trend line as possible. The CCI Indicator will be used as a trigger today and we will wait for the indicator to trade through the -100 oversold level prior to entry. Our initial stops should be set below our trend line below 7,225. Our limit distance will be determined upon final entry of our trade but should focus on new highs for the GER30.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.