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DAX Tech Update: Correction Welcomed

DAX Tech Update: Correction Welcomed

What’s inside:

  • Relative calm following the Tuesday surge higher
  • Gradual pullback or consolidation welcomed for renewed longs
  • Targeting 10867 in the short-run

In the wake of Tuesday’s 2.5% rally and fifth consecutive day higher, during the past session-and-a-half the DAX has been trading with relative calm. The index could use a correction in either time or price, or a little of both. As we pointed out yesterday and in recent weeks, if certain levels are cleared, and they have been, then the DAX could turn macro bullish.

Even if the big picture view turns out to be incorrect, the recent surge should lead to a move towards the 10867 area in the short-run, where resistance from December and an upper parallel from the February low lies.

A gradual pullback towards 10486 (April high) or sideways price action (consolidation) would be welcome for working off short-term overbought conditions and reloading the coil for another spring higher. This would certainly help skew risk/reward more favorably towards the long-side. It would require a sharp drop below around 10300 before the recent confluence of resistance would be undercut and alternate views would need to be seriously considered.

DAX (Ger30) Daily

If no correction of any sort develops and the DAX continues to push its way into resistance, given it will have done so in a V-line manner, we may be inclined to take a short should price behavior warrant such action.

For now, though, again, looking for risk/reward to skew itself positively through either a gradual decline and turn back higher or period of consolidation.

Find out what characteristics separate winning traders from the rest – “Traits of Successful Traders”.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

You can email him at instructor@dailyfx.com with questions or comments.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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