DAX: Range-bound Price Action Continues, More Bull Than Bear
- Rangebound price action continues to dominate, looking like consolidation
- Trading levels on the top and bottom-side
- More time needed before a swing trade could develop, nimble traders can look to levels to fade until then
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Since last taking a look at the DAX on Wednesday, the market remains rangebound below the important 10800 area and not offering many additional clues as to which direction the index wants to move next. But as we said in our last post, horizontal price action below resistance with no clear rejection at overhead levels suggests a serious attempt to push above 10800 could be around the corner.
In today’s trade, selling pushed the DAX towards the low-end of the range, with 10576 penciled in as the lowest point (11/10 low). A break below this level of support wouldn’t be as significant of a technical event as the DAX taking out steadfast resistance surrounding 10800.
We’re not saying a drop lower couldn’t come with plenty of momentum, but just that the line-in-the-sand from the short-side isn’t as clear as the long-side.
On a drop below 10576 we will pay close attention to the strength of the move and whether the market can quickly rebound or not. The next meaningful level of support arrives at the trend-line rising up from the June low, currently below 10400. The next level of price support below that point, given the ‘chart-wrecking’ reaction to the US presidential election, isn’t until the 11/9 low at 10175.
On the top-side, there is a trend-line running off the 11/14 high around 10700 to contend with. This trend-line could become a part of a wedge. We’ll need more time to elapse before we have full pattern development, but a consideration worth keeping on the board. Above the trend-line a thicket of resistance will keep pressure on the market until a close well above 10800.
At the immediate moment, traders will want to avoid getting chopped up in these market conditions. Very short-term minded traders can find scalps off levels. (i.e. – This morning we are seeing a bounce develop from within 3 points of the 11/10 low.) Swing traders will need to continue being patient.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinonFX.