In looking for opportunities in the equity index and commodity sectors, one market (DAX) stands out while others are in need of a little more time before solid risk/reward opportunities present themselves. Gold looks like it could have another leg higher coming soon, same with oil but obviously from a different perspective.
- DAX has compelling chart set-up
- Gold price weakness could offer pullback opportunity
- Crude oil basing, move to 2008 trend-line could come soon
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DAX has compelling chart set-up
The DAX is currently trading in a zone of resistance extending from around 12550 up to ~12610. It’s an area of significance given its influence as both resistance and support as far back as February. What really gives the current context the most appeal, is the short-term technical pattern most visible on the hourly time-frame.
Looking at the hourly time-frame (cash session hours), a rising wedge has been forming over the past week or so. It has a corrective look and feel about it, that is it looks like a resumption of weakness is the more likely scenario. But we must first wait for the pattern to be confirmed.
Here are the scenarios we looked at:
- Wedge breaks the underside trend-line and the market starts rolling downhill.
- A top-side breakout unfolds, but quickly fails with the DAX dropping below the underside trend-line. This could be the most powerful outcome given the false breakout.
- A top-side breakout it sustained. This is viewed as perhaps the most difficult to take advantage of given the market’s extension off the lows – At the very least a bullish break would be reason to avoid shorting.
DAX Daily Chart (Solid resistance)
DAX Hourly Chart (Rising wedge)
For more in-depth fundamental and technical analysis, check out the Q3 Forecast for Global Equity Indices
Gold price weakness could offer pullback opportunity
Last week, gold found buyers at the 2015 trend-line and just above the December low. The drop and bounce posted a key-reversal on the weekly time-frame. It’s arrival at such pivotal support warrants more upside. With stalling momentum on the current pullback, a dip-trip buying opportunity may present itself this week. If it does, the top-side target is the trend-line off the April high.
Gold Daily Chart (Looking for higher-low, big support below)
For more in-depth fundamental and technical analysis, check out the Q3 Forecast for Gold
Crude oil basing, move to 2008 trend-line could come soon
Following crude oil’s big rip form the July slope it is basing as it works off overbought conditions. This comes at a top-side trend-line from January, but the overhead line isn’t expected to act as major resistance.
A little more digestion would be ideal before attempting to break higher. If all plays out in line with the trend, then the 2008 trend-line could come into play in the not-too-distant future. The line resides roughly around 79 (+/- a couple of handles). How price action plays out there (should oil rise to that point) will be of significant interest.
Crude Oil Daily Chart (Basing, 2008 t-line next?)
For more in-depth fundamental and technical analysis, check out the Q3 Forecast for Crude Oil
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX