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DAX 30 Technical Highlights:

  • DAX turns down from H&S neckline again
  • 2011 trend-line test could be right around the corner
  • A hold keeps sellers at bay, a break could lead to big losses

For the intermediate-term fundamental and technical outlook for the DAX & Euro, check out the Q4 Trading Forecasts.

DAX bottled up, but that could change relatively soon

Last week, I referred to the DAX as ‘caught between the lines’ because of the neckline of the big-picture head-and-shoulders pattern acting as resistance while the 2011 trend-line remains a big line of support. The turn down from the neckline after another gap above it yesterday was fierce, helping to reinforce the area from 11600 up to 11675 as strong resistance.

The 2011 trend-line will quickly come into focus on further weakness, and while the thinking on this end is that at some point it will break due to forces from the broader topping pattern, it is to be treated as support for as long as it holds.

From a tactical standpoint the trend-line doesn’t make for a great spot necessarily to get long given the general weakness, but it does suggest one should be cautious with shorts upon meeting it until we see a clean break. It would be unsurprising to see the market bounce around some more between support and resistance before we have a resolution.

Traders can continue to use these levels/lines as a means for assessing trade set-ups until one side gives-way. A break on the downside is viewed as being quite bearish, as the 2011 trend-line is the only ‘easily’ identifiable object standing in the way of seeing the broad head-and-shoulders top exert its full potential (a move to sub-9k).

Should the DAX recapture the neckline at some point there is still enough of a downward tilt to the chart to make it a difficult uphill battle for longs outside of very short-term holds. Risk of rallies failing at this time are high.

For market sentiment and to learn more about how to use it in your analysis, check out the IG Client Sentiment page.

DAX Daily Chart (Neckline resistance, 2011 t-line support)

DAX daily chart, neckline proving as resistance, 2011 t-line not far below

DAX Weekly Chart (H&S meets 2011 trend-line)

DAX weekly chart, H&S meets 2011 trend-line

Want to learn more about trading the DAX? Check out ‘How to Trade the DAX’, and join me weekly for technical updates in the Indices and Commodities webinar.

Forex & CFD Trader Resources

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at@PaulRobinsonFX