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DAX: Challenges Critical Area of Support, Finds Buyers

DAX: Challenges Critical Area of Support, Finds Buyers

2016-08-23 09:24:00
Paul Robinson, Strategist
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What’s inside:

  • The DAX tests key area of support and holds
  • Risk skewed to upside from here, but consolidation phase may be in order
  • Summer trading environment calls for defensive trading

After several days of declining the DAX tested and held a key area of support. The April peak, which we previously considered to be the last line of resistance (now support), was the most important of the levels to get undercut and hold on a daily closing basis. A retest of the 2011 trend-line was also successful, while the May and June highs were not quite tested, but came close enough to be considered a retest (May high was missed by 12 points).

Yesterday’s price demonstrated a solid rejection at support, and given the ability for the DAX to hold on suggests risk has become skewed to the upside. If the market doesn’t begin to rise shortly, a consolidation phase could very well unfold; a development we would welcome given the powerful rise off the post-referendum lows. As long as there are no systemic shocks, a rise to a swing high created back in December just beneath 10900 and the upper parallel matching the one created off the February low (~11000) looks like a reasonable target zone over the next few weeks.

A break below yesterday’s low at 10386 and the May and June peaks (lowest price point at 10348) exposes a deeper decline towards the 2015 trend-line broken earlier in the month.

DAX Daily

DAX: Challenges Critical Area of Support, Finds Buyers

Keep in mind, it’s still the dog-days of summer, with a thin August trading environment dominating trade. This keeps us in defensive trading mode until we move on past the end of summer.

What separates successful traders from the rest? Find out in our free trading guide, “Traits of Successful Traders”.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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

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