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DAX – Promising Pattern Continues to Build After False Breaks

DAX – Promising Pattern Continues to Build After False Breaks

What’s inside:

  • 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

What’s driving European equity markets? Find out in our market forecasts.

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.

DAX: Daily

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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.