DAX 30 Forecast:
- The DAX 30 fell roughly -40% from the February 19 high to the March 19 low
- The recent recovery has seen the index reclaim various technical levels which it may now use as support going forward
- How to Trade Dax 30: Trading Strategies and Tips
DAX 30 Price Outlook: Index Bleeds Lower but Remains Above Support
The DAX 30 moved lower in Wednesday trading alongside a broader decline in many risk assets. Despite recent losses, the DAX is considerably off its March lows and price action has been largely constructive. As a result, the German equity index has been able to reclaim a string of technical levels that it can now look to use as support should bearishness persist.
DAX 30 Price Chart: 4 - Hour Time Frame (February 2020 – April 2020)
To that end, a nearby Fibonacci level at 10,210 will be an early opportunity for bulls to look to ward off further losses. The retracement is drawn from the February highs to the March lows, and its influence on price is visible throughout the latter half of March and in early April. Thus, if bears look to drive price lower, the 10,210 area may have something to say about it.
On the other hand, resistance may reside overhead at 10,900 which coincides with the 50% retracement of the recent market crash. Since not all chartists believe in the 50% Fibonacci level – because technically it is not part of the Fibonacci sequence – subsequent resistance around 11,060 may be a more appropriate barrier to watch.
Further, the line marks the last technical level before the DAX 30 can look to fill the gap overhead from 11,060 to 11,460, which may allow price to shoot higher in quick fashion. Therefore, the 10,900 to 11,060 area will likely provide robust resistance, but may open the door to a surge higher once surmounted. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
Although the fundamental landscape remains highly uncertain, it seems a slow in new coronavirus cases and the response of governments and central banks has allowed traders to drive equities higher. Still, few analysts can agree upon the exact length and depth of the oncoming recession which leaves the rebound rally vulnerable. Until the markets and global economy return to a degree of normalcy, the risk of an abrupt reversal lower looms but the opportunity for quick trades in the other direction cannot be ignored.
With that in mind, the overhead gap on the DAX presents an interesting possibility in which traders may look to capitalize on the empty space if bullishness persists. With an invalidation area in the area beneath 10,210, traders willing to take on bullish exposure may set their sights on the space immediately after the gap and enjoy an attractive risk-reward setup that relies on the strength of nearby support and renewed risk appetite in the days ahead.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
