DAX – Promising Pattern Continues to Build After False Breaks
- DAX fails to break higher from ascending wedge, puts in key reversal bar, which…
- Led to yesterday’s weakness, but the pattern still maintains
- Breakout coming soon
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On Wednesday, we described the DAX as, “getting bulled up for another leg higher”. And it was, and it did go higher – for a few hours. Most of those morning gains were just as quickly erased during the afternoon session. This put in a very technically sound key reversal bar, and on that led to Wednesday’s late-day selling carrying right on into yesterday.
The other day we were also discussing the ascending wedge under construction, which with yesterday’s late-day bounce kept the market in the pattern after sellers kept it inside on Wednesday. The wedge-building process continues. Keep in mind, it’s not the break of the top or bottom-side lines on an intra-day basis which we count to be a valid break, but rather the daily close above or below associated lines. Until we get that, not a lot to do here in our book.
Trend and ascending nature of the pattern still point to an upward breakout, but we’ll want to see a strong close above the horizontal trend-line and rally above Wednesday’s key reversal-day high. The first point of interest on a breakout is the top-side slope running higher since February; it’s a moving target, but it lies not far beyond 13k.
A close below the underside trend-line will quickly bring into play the November trend-line, which would need to be broken in conjunction with the pattern for downward momentum to kick in. Support would first come in around 12490, then the gap-day low at 12289, then a full gap-fill.
For now, we’re in ‘wait-and-see’ mode, but that should soon change as the apex of the ascending wedge is very near. In the next few days we should see a move develop.
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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.