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DAX Drops into Trend-line Support, Hourly Chart in View

DAX Drops into Trend-line Support, Hourly Chart in View

2016-11-02 07:57:00
Paul Robinson, Strategist
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What’s inside:

  • The DAX drops hard into June trend-line
  • Needs to quickly find support or increases likelihood of sustaining additional losses
  • 60-minute chart in view with short-term levels and notations

In yesterday’s session, the DAX gapped higher by about 40 points and quickly found sellers above the 10/28 high. The resulting gap-n-trap sell-off ended with the index dropping hard to close the session at the trend-line running up off the late-June lows.

The next couple of days are important, with trend support at hand the DAX needs to quickly turn higher or run the risk of further losses. Big sell-off days like yesterday, regardless of support or not, are difficult to reverse quickly without probing lower first. While sellers may push the DAX below trend-line support on an intra-day basis, the daily close is what will matter the most. Early indications from the futures market suggests this will be the case, with the futures off by about 49 points at the time of writing.

A hold of key support still keeps the trend-line intact, but there will be work to be done to turn the tides back in favor of longs. A move below clears a path towards the next swing low at 10349 created on 10/13.

DAX: Daily

DAX Drops into Trend-line Support, Hourly Chart in View

Created with Tradingview

Looking at the 60-minute chart, we clearly see the path of least resistance off the 10/25 high is down with the descending channel in place. Support comes in at the 10/17 swing low and lower parallel off the 10/25 highs (~10490), which is also in the vicinity of the June trend-line. A drop below 10490 will bring the 10/14 gap into play between 10405 and 10450. The next significant swing low doesn’t arrive until the 10/13 low at 10349.

A reversal back higher off support could run the DAX into resistance at lows in place back to 10/19 and the backside of a broken trend-line off the 9/30 swing lows. The two intercept in the vicinity of ~10580/600. A little further above there, the top-side parallel off the 10/25 highs could come into play.

DAX: 60-min

DAX Drops into Trend-line Support, Hourly Chart in View

Created with Tradingview

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---Written by Paul Robinson, Market Analyst

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