DAX triggers weakness

DAX triggers weakness

13 February 2018 from Tradingportalen

Last week German DAX triggered weakness when the index during volatile movements broke long-term technical support. Previously a number of short-term technical weakness was triggered, but this time long-term technical support was broken. In case DAX starts finding ground below support area right below 12 000, the index might be about to show further weakness up ahead. Potential bottom formation could develop, where the index would bounce back and potentially test resistance at 12 750-12 800.

Last week the German market fell alongside global markets. DAX closed the week at 12 107.48, ending the week with a -5.3 percent loss. This year’s development for the DAX, is now at -6.3 percent.

International market turmoil triggered when U.S employment numbers were presented on February the 2nd, presenting a quite higher salary increase than expected. This caused U.S treasury market to climb higher, spilling over to the U.S market.

The market has previously shown a tendency to shake off any news, during low volatility, diverging from the latest fact.

When a number of sales programs were triggered, market showed an extreme volatility. A quite different climate than the one we have been used to from U.S, this past year.

Since global markets in many words are in sync, even the German market moved lower this past week. So far the state of the market in Germany looks strong, but even here there is a worry about rising inflation and interest rates.

DAX triggered weakness last week, when it managed to break support levels at 12 750-12 800. The long-term technical trend was broken at this time, meaning the index parked itself well below its 40-week moving average. In case the index breaks sentimental support at 12 000, DAX could be about to show even further weakness. If this happens, the current higher highs and lows would break.

Weekly chart of the DAX                                                                                                                                     

In order for the DAX to start showing potential strength, a clear reversal would be an attractive move, potentially moving lower for a week and during the same week close considerably higher, during increasing market activity. Another attractive move, could be if the index during relatively high market turnover starts finding ground above resistance area around 12 750-12 800.

Moving over to a more short-term time perspective, the daily chart below it is clear that DAX has triggered weakness during the past weeks. Stochastic indicator do however show a clearly technically oversold DAX.

Daily chart of the DAX

Even if this is not considered a sign of potential strength up ahead, it might be a sign that a potential recoil within the current weakness might be in order. Strong resistance is holding up at 12 650, followed by 200-day moving average at around 12 750, as well as resistance area around 13 140.

Support at 12 000 is closely waiting by, and could trigger continued weakness if it breaks.

Moving over to a shorter timeframe, the hourly chart below also shows the importance of the technical 12 000 level, as well as resistance at 12 650.

Hourly chart of the DAX                       

Based on a short-term perspective resistance at 12 250 is of interest, followed by resistance at 12 650. Beyond this, further resistance at 13 140-13 150 is waiting by.

Sentimentally and technical support at 12 000 could be a deal breaker, and volatility might pick up around this area.

Based on a long-term perspective it is a bit more tricky at the moment, the index triggered weakness last week, and the horizon is not as clear at the moment.

 

Important legal information

 

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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.

 

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13/11/2019 17:59:37

 

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