Potential strength in DAX, despite hesitation…

Potential strength in DAX, despite hesitation…

29 September 2017 from Tradingportalen

During the past week DAX has continued to move higher, and showed potential further strength. We are keeping a close eye on resistance around 12 680, as if this breaks we might see an even higher move towards previous record level at around 12 951. Technically the index is overbought, and market gain has been during a time of low market activity. Potential weakness could rise, in case index breaks support around 12 500, 12 340, during increasing market activity. Long-term view we are also keeping a close eye on support at around 11 850 – 11 868.

For the past week, German market has moved higher. DAX closed 12 657.41 on Wednesday, gaining +0.8 percent since the last week, and +10.2 percent this year alone.

The past weekend’s German election gave a win to chancellor Merkel, despite a lower edge. Focus will now shift on setting up a new coalition government, which could take some time.

The euro has lost ground since then, giving further momentum to a recovering U.S dollar. This will as well increase business competitiveness in Germany. Based on a short-term view, the net effect of upcoming challenges to form a government, is believed to be positive.

Beyond this, financial markets have gained slight risk appetite the past few weeks, fueling the market with buyers.

DAX showed potential further strength, as it broke resistance around 12 600 – 12 650. Currently DAX is trading around resistance 12 680, and if it manages to break this level, we might be looking at further strength up ahead. Resistance at previous record level around 12 951 is closely awaiting to be tested.

DAX is however, on a long-term technical view believed to be within a positive trend. The index is however, gaining during a period of relatively low market activity, compared to previous market loss. Negative volume pattern continues to indicate that we might have to be slightly careful when it comes to current market gain, based on a long-term view.

This is telling us to keep an even closer eye, in case the DAX will start to move lower during increasing market activity.

Weekly chart of the DAX                                                                                                                                     

Stochastic-indicator continues to show in our weekly chart, that DAX is no longer technically oversold. In case the indicator starts moving back above a technical overbought scenario, we would start paying closer attention to the market activity.

We might be looking at potential weakness, in case DAX breaks support around 11 850 – 11 868.

Moving along to the daily chart below, DAX could potentially find weakness, in case it breaks support around 12 500, 12 340. Even the area around 200-day moving average currently located at 12 178 is interesting to keep an eye on. If the index breaks these technical key levels during a time of increasing market activity, we might be looking at further negative momentum up ahead.

Daily chart of the DAX

So far based on a short-term perspective we are believed to be experiencing strength in the market, even if there are technical worries of potential weakness up ahead. It would be considered positive, in case the index finds ground above resistance around 12 680, and 12 951.

Stochastic-indicator in our daily chart, is currently significantly overbought in technical terms. On its own it is not considered as potential weakness up ahead, as the index can continue to be overbought for a longer period of time in a strong trend. But it is an indication, to pay a close eye on potential turning points as well as for any profit taking.

In the hourly chart below, DAX continues to indicate further strength, but support is closely waiting around 12 646, and around 12 630. In case the index breaks support 12 550, 12 490 we might be looking at further weakness.

Hourly chart of the DAX                       

Based on a short-term perspective, sellers might come in at resistance around 12 680, or 12 677 to be more precise. In case DAX finds ground above this price level, we might instead be looking at further strength up ahead.

As the market has moved higher, it has so during a time of relatively low market activity, DAX is technically overbought, meaning the probability is believed to be higher that we could find a turning point up ahead.

In case we would get a turning point, and DAX breaks support around 12 550, 12 490 during a time of increasing market activity, we might be looking at further weakness up ahead.

Based on a more long-term view, we continue to monitor the trading activity and volume patterns.

 

 

Important legal information

 

Legal notice

This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

 

The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

06/12/2019 01:27:32