DAX short-term opportunities

EURJPY analysis
June 25, 2014
Is Nikkei ready for a major reversal?
June 27, 2014

German DAX index is approaching critical support levels at 9800-9820. Dax decline from 10050 looks unfinished as long as price is below 9910. Short-term trend is down and price is found below the Ichimoku cloud in the 1 hour chart as shown below. This downward move is challenging important support levels at 9800-9820. However this support is not broken yet and it may never get broken that is why I prefer to go long at current levels and use the support as a stop reverse.

DAX2

This critical support is depicted in the chart above as the two horizontal lines. I have placed a big red arrow below these two support levels. I believe that breaking below this level Dax will at least make a downward move of 100 points towards 9700. If support is broken I will turn bearish targeting the lower red channel boundaries now at 9550 and rising.

dax

The short-term upward sloping blue trend line has been broken and my short-term target is 9712 where the 38% Fibonacci retracement is. This means that we should expect  another 140-160 point decline from current levels. But as I mentioned above, 9800-9820 is important support and I prefer to wait to see it being broken before I short this market. From the Elliott wave theory perspective, the decline from the all time highs does not look impulsive. This makes me cautious of thinking of lower targets than 9700 or 9600 which is a perfectly normal downward correction within the limits of the longer-term up trend.

Concluding, trend is down and I favor long positions at current levels with 9800-9820 stop reverse. If support fails, I will turn short-term bearish targeting 9700-9600. I do not believe we can see a deeper correction in Dax so around 9600-9700 I will be looking to reversing back to long positions as the decline has a corrective form.

As always, thank you for taking the time to catch up on my thinking.

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.