DAX – Staying the Course Until Price Action Suggests to Do Otherwise
- DAX hanging out in record territory following small Macron 'gap-n-trap'
- Prior top-side trend-lines of resistance turned support
- Sticking with a long bias until price action suggest we do otherwise
Where is the DAX heading? See what's driving stocks in the quarterly forecast.
It’s been a quiet week thus for the DAX. Monday started off with a small ‘gap-n-trap’ on the Macron victory; a ‘buy the rumor, sell the news’ type reaction; well, the buying was big in response to the first-round of the elections, but the selling on the final results has been negligible by comparison.
Price action the past few days is leaving the DAX hanging out in record territory forming a high-level consolidation above the February top-side trend-line it recently surpassed. It was the last line of resistance we had penciled in. Adding further validity to this trend-line was Monday’s hold of this trend-line as support (old resistance = new support). In the short-run, we’ll operate off it as support (~12700). Should we see a break beneath, not far below lies another top-side trend-line (~12600) running higher since August.
While we continue to maintain a bullish bias, with volatility as low as it is our expectations have been adjusted accordingly. If the DAX is to continue trending higher it may do-so in ‘grinding’ fashion. Under this view, a good plan of attack for short-term traders is to look to minor weakness as buying opportunities with a plan to sell into strength (We discussed this yesterday as it pertained to the S&P 500.)
To undercut the bullish tone of the market we will need to see some type of sharp reversal in price action suggesting the market is saturated with buyers and ready for a decline. Until then, we see no reason to fight the trend.
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.