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Never Back Down

Never Back Down

DailyFX, Research

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The German 30 (DAX) Index has been listless in its direction since a new high was carved out on May 2nd at 7,603. Since this time the pair has been trading in a downward channel and is currently attempting to test support near the 7,000 handle. As price consolidates between support and resistance, strong opportunities are presenting themselves for breakout trading.

Shares around the world have been fundamentally weak. With economic uncertainty around the globe and specifically in Greece and the US, investors are looking for less risky assets to invest in. As these factors are unlikely to change quickly it is reasonable to believe that the current downward trajectory may continue. Alternatively, if conditions improve the GER 30 and other indices around the world may not have to back down from support levels .

Price Action

Taking price in to a H4 chart, we can see price trading in a channel heading toward support below the 7,000 level. A break below support would signal further losses and allow us to continue to trade this channel in its downward trajectory. A breakout above the resistance line of our channel would signal a resumption of our trend. Entry orders can be used neatly prior to our breakout regardless if price breaks higher or lower.

Trading Opportunity

My preference is to bracket the GER30 using Entry orders. Entry one will be an entry to sell the GER30 under support near 6,950 or better. A stop should be placed near 7,100 risking 150 points on the trade. Limits should be set at a minimum of 300 points away at 6,650 for a clear 1:2 Risk/Reward scenario.

Entry two will be an entry to buy the GER30 over current resistance above 7,150 or better .A stop should be placed near 7,000 risking 150 points on the trade. Limits should be set at a minimum of 300 points away at 7,450 for a clear 1:2 Risk/Reward scenario.

Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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