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DAX Short-term Trading Outlook

DAX Short-term Trading Outlook

What’s inside:

  • DAX short-term trend is lower
  • Hourly chart in focus
  • Support and resistance levels outlined

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On Tuesday, we discussed the DAX from a broader perspective, taking the view that the decline off the January highs is corrective within a longer-term uptrend. Today, we will get a bit more granular and look at the short-term time-frame.

The hourly chart remains clearly stuck within the confines of a downtrend since the 1/26 high, marked by a series of lower highs and lower lows. This morning the market attempted to push through the trend-line off the late-Jan high and above resistance from 2/7 back to 2/2, but was rejected in trying to do so.

This is where things get a bit tricky for the short-term trader. While the trend at this time is still favorable for shorts, support exists right around 10480. Not far below we have the 10400/425 area to look for signs of support as well.

DAX: Hourly

Created with Tradingview

While the path of least resistance is lower in the near-term, traders operating from the short-side will want to pay close attention to how the market responds to support levels for signs that the recent slide is coming to an end. Yesterday, for example, in the afternoon the DAX was headed south when it tried to dip below 10480 but quickly found buyers into the close; buyers have stepped in twice in two days at this level. Any approach made on that level will be watched with interest. Shorts will want to perhaps tighten up stops, or stand aside if flat upon approach. Those looking to play for a bounce or scoop for a bigger picture trade may want to use that level as the line-in-the-sand for entries from the long-side.

A break below 10480 will find the DAX with a little room to run to the downside, but not much as 10425/400 arrives. This will be another important reaction zone to be treated similarly to 10480.

For now, the trend off the Jan 26 highs is lower, and from a short-term trading perspective we will run with that as the path of least resistance as long as a higher high from 2/7 doesn’t develop or an aggressive bounce doesn’t unfold off of one of the key support levels discussed.

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---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.

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