DAX Chart Analysis – Lower Levels to Soon Come into Play
DAX Technical Highlights:
- DAX support break leads to other important lines/levels
- Feb 2016 trend-line and April 5 gap-fill come into view
- Big-picture head-and-shoulders becoming increasingly likely
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Coming into the week, we noted that if the Thursday break of support in the 12600/500 region was not quickly recaptured, look for further weakness. Yesterday’s 2.4% decline in the DAX has the aforementioned area in the rear-view mirror as support, and on any counter-trend trade higher it will be viewed as a material barrier of resistance.
The move down off the monthly high has been swift, and while it may be overdone in the very short-term, there is still more room to go before new support levels are met. There are two lines/levels in focus: the February 2016 trend-line and the April 5 gap-fill at 11958.
Tactically speaking, minor bounces are viewed as selling opportunities until meaningful support is met, however; establishing a fresh swing short at this juncture doesn’t hold appealing risk/reward, so set-ups from here should be of shorter-term durations (i.e. watching the hourly time-frame for stalling rallies).
The big-picture head-and-shoulders we have been discussing recently with each push lower is working its way closer and closer towards becoming a reality. It will require a break of the previously mentioned support levels and the neckline down near 11600 before we can put it into play. If the S&P 500 fails the test discussed in today’s webinar, a threat of breaking the neckline may be in the not-too-distant future.
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DAX Daily Chart (Looking to lower levels)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.