Consolidation continues before upcoming moves

Consolidation continues before upcoming moves

27. helmikuuta 2018 Autor Tradingportalen

German DAX previously triggered weakness but looks to be consolidate before bigger move ahead. Long-term technical outlook is slightly harder to interpret at the moment. Potential weakness could come to light in case the index starts climbing above at 12 000, as well as potential strength if resistance breaks at 12 750 – 12 800.

Last week German market continued to move forward irregularly, but relatively calm. DAX index closed the week at 12 483.79, gaining +0.3 percent. Since the beginning of the year, the index has dropped a total of -3.4 percent.

Compared to beginning of February when the German market like other global markets fell heavy due worries on inflation and interest rate, the past week was relatively calm.

Technically the market moved to a point where it might recoil, unless further negative news would spread across the globe. Macro and economic comments has on the contrary dampened the worries on investors the past two weeks, and it will be interesting to see if this will continue, or if we are in a situation where new concerns will come to light.

In a scenario where market worries comes back to the field, it might also depend on international market climate. For example, if U.S market starts climbing below this years low, technically other markets might follow due to worries.

Moving over to a more technical outlook, it is a bit harder to interpret at the moment. Looking at the weekly chart below, German DAX previously triggered weakness when it broke positive trendline, and support area at 12 750 – 12 800, beginning of the month.

Weekly chart of the DAX                                                                                                                                     

Stochastic indicator on its own shows that DAX is currently in a spot where the index might find a turning point. This might potentially be one side of the coin where strength might come to light and hold the index above support levels. Technically resistance area looks to be quite strong at 12 750 – 12 800, as well as 40-week moving average is showing weakness.

In case the index starts finding ground below support levels below 12 000, the index might be about to show further weakness ahead.

Moving over to the daily chart below, we clearly see that the DAX from end of January to beginning of February triggered a number of clear signals of weakness. Since then, the index has been stuck in a consolidation between support area at 12 000, and resistance area around 12 600 – 12 650. In case DAX breaks resistance, potential further strength might be in the ball park. On the other hand, if support area breaks, the index might be about to show even further weakness yet again.

Daily chart of the DAX

Hourly chart also shows that DAX looks to be gathering strength within its consolidation. Potential strength might come to light if resistance breaks at 12 500, paving the way for further strength if resistance breaks at 12 650.

Hourly chart of the DAX                       

In case the index would break support at 12 275, DAX might trigger short-term weakness. Technically it might be even more clear if the index starts moving below 12 000.

Based on a short-term view, resistance at 12 500, and 12 650 is of interest. Secondly resistance at 13 150.

On the flip side, support is closely waiting by at 12 275.

 

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.

21.10.2019 4:50:24

 

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