DAX Technical Analysis – Selling Continues, August Low in Sight
- DAX quickly erased gap-down recovery with help of U.S. markets
- If selling doesn’t ease up soon, looking to 11935/868 as possible support
- Short-term traders market with volatility so high
Tuesday’s gap-down reversal produced one decent up-day for the DAX, but the recovery from that morning gap through yesterday was wiped away yesterday in one fell-swoop. The selling was only modest on Thursday until U.S. markets opened higher and swiftly soured risk sentiment.
If selling continues, stability might not be found until price support around the 11935/868-area is met, the low from August. At that juncture the market will be quite oversold and at least have an important swing-low to lean on should we see the DAX reverse back higher.
As far as finding a bottom, catching falling knives is a dangerous business. The safest approach is to wait for a large bounce with a modest retracement or rejection of a low already formed. An event which looked possible heading into yesterday until the late-day carnage. If today, the DAX can mount a reversal and close above the Tuesday low, a successful retest may be in. If no reversal, look for aforementioned support from August on further weakness.
From a tactical standpoint, it’s a short-term traders market with volatility having more than doubled in the past month. Two-way trading with a downward bias remains the theme until we see some type of capitulation bottom, from which a larger recovery can mount.
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DAX Daily Chart
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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.