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DAX: Bull-flag Consolidation Taking Shape

DAX: Bull-flag Consolidation Taking Shape

2017-01-10 10:02:00
Paul Robinson, Strategist
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What’s inside:

  • DAX continues consolidation phase, looking for higher prices soon
  • Consolidation taking on the shape of a bull-flag
  • Top and bottom-side levels in focus

Q1 and FY 2017 Forecasts (FX, Equity Indices & Commodities)

When discussing the DAX on Friday this is what we had to say, “We’ll continue to reside in the bull-camp as long as price action remains as it has – higher, then sideways, higher, and so on.” A couple of days later and here we are furthering along a sideways phase in the uptrend; a healthy development so far for a market which has given little reason to be anything but long or flat.

The current chop is taking on the shape of a bull-flag and looks poised to break soon, but may need a day or two more of filling out first. The first level of contention on a push higher comes in quickly at the 1/3 swing high at 11637, and upon breakout the DAX will begin looking to test a series of swing highs created during the descent from the record high in 2015. Top-side levels in focus: Aug ’15 – 11670, Jul ’15 – 11802, and May ’15 – 11920.

Should the recent backing-and-filling turn into something more aggressive, we will look to the top of the late-December channel at 11481 and bottom of the channel around 11400 as key points of support. It would be important to hold onto the low end of that channel and the low of the day (1/2) which began the year. A drop below 11400 would be damaging for prospects of higher prices, and warrant a shift in bias towards lower prices.

But for now, the DAX is acting well, global risk appetite remains relatively healthy, so we will roll with the notion of seeing higher prices in the not-too-distant future.

DAX: Daily

DAX: Bull-flag Consolidation Taking Shape

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---Written by Paul Robinson, Market Analyst

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