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DAX: Sharp Reversal Results in Follow-through Selling

DAX: Sharp Reversal Results in Follow-through Selling

2016-08-02 09:06:00
Paul Robinson, Strategist
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What’s inside:

  • Yesterday the DAX put in a key reversal day
  • Broke through bottom-side t-line of rising wedge
  • Sellers have the upper-hand support levels highlighted

From yesterday’s commentary: “Today, if the DAX can’t maintain its gains and reverses course, it would not only put in a key reversal day after trying to break through serious levels of resistance (solid sign of rejection), but set itself up for breaking below the lower-side t-line of the rising wedge pattern.”

That is exactly what we saw yesterday – reversal day at major area of resistance, and today the DAX is slamming through the lower-side t-line of the rising wedge pattern. The 10265 level we noted as important also showed no support this time around as it had in the latter part of July.

DAX: Sharp Reversal Results in Follow-through SellingDAX: Sharp Reversal Results in Follow-through Selling

The downward momentum is quickly bringing the 10000/100 support area into focus. This should provide some support, even if a break for lower prices is to occur, but not viewed at this time as a spot to enter from the long-side. Below 10k we will look to the 9900 area as the next area of support.

At this time, it is difficult to say if this is the beginning of a large decline or simply a pullback. But, given the sharp reversal and continuation so far today (if it holds), it would appear this down-move could gain traction.

With that mind, short-term traders and scalpers can look to failing bounces as potential opportunities to establish shorts while watching how the market responds to support levels for cues to cover.

Learn more about how to utilize technical analysis with one of our many free trading guides designed for traders of all experience levels.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

He can be reached via email at instructor@dailyfx.com with any questions or comments.

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

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