DAX: for whom the Bell tolls?

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February 8, 2017
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February 9, 2017

Has the German DAX index topped and made a fake breakout to 11900 or is this is just another dip (BTFD!!) to be bought? How much will the rally continue that started after the dip from the US election results at the 10k price level?  Let’s see some charts.

dax

Above you see a daily chart of the DAX index (area) combined with two simple indicators that I use as an automated signal system. My system provides critical support and trend change at a close below 11500. This would be expected to push the index towards the blue trend line near 11200. A close back above 11610 will re-enable the bullish mode.

The weekly chart below tells me two things. Firstly, watch the oscillators. A warning is given there. Secondly, the tenkan-sen (Red line cloud indicator) is at 11518 and a weekly close below it will be a bearish signal. 1st target will be at 10930 and next at the lower blue channel boundary or the weekly cloud support around 10500.

DAX4

Another confirmation how important the 10500 is on a weekly level. On a daily basis (chart below) at 11180 we find the 38% Fibonacci retracement of the entire rise from 10013 (November low). Cloud support is near that area and this will be a big test for the longer-term bearish scenario of 10500 (shown above).

dax3

In the 4 hour chart as shown below price is trapped inside a consolidation range. Was the breakout a fake one? will a new low below 11500 be sustained or will it be fake too?

dax2

Short-term trend is bearish as price is below the Ichimoku cloud. Short-term trend changes according to clouds at 11710. My view is that as long as we hold above 11500 bears should be cautious. Clear 11500 and below and we then focus on 11200-11300. A break above 11710 I believe we could see 12200-12300 next.

Currently I have a short position since 11710 and although I would prefer to see a bigger correction towards 10500, I do not see the rest of the major indices follow or at least show some weakness as DAX. That is why I also consider taking profits around 11500 if there is no breakdown in other major indices as well.

Markets are a dynamic being and we need constant adjustment to the new data we receive everyday. The plan is there, the levels to trigger the necessary decisions are there, we only need to fine tune it and leave feelings out. Thank you for taking the time to catch up on my thinking.

For whom the bell tolls? (Metallica)

Alexandros Yfantis
Alexandros Yfantis

Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.