DAX about to stabilize

DAX about to stabilize

den 21 november 2017 författare Tradingportalen

The last couple of weeks the German DAX-index has shown signs of weakness. Long-term trend still looks to be intact, and positive, and based on a short-term perspective the index is also technically oversold. The index might be about to stabilize, and potential strength could come to light in case the index starts finding ground above resistance around 13 100. Potential further weakness could instead be in the ball park, in case the index breaks support at 12 850.

Last week the German market delivered an irregular development. DAX index closed the week at 12 994.73, down -0.40 percent, meaning this year’s gain is now at +13.2 percent.

The past week has been a bit of a “risk-off” behavior in the global markets. Stocks and commodities has been experiencing profit taking. Slight concern around the economy in China, and its development in the U.S concerning tax reforms from president Donald Trump.

The market gains this past year, has been driven by optimism around economic growth from expectations from Donald Trump, regarding tax reforms and infrastructure investments, giving momentum to global growth in the market.

This past Thursday republicans managed to pass its part around tax reform in the house of parliament. The effect in the market was not that big, as the senate needs to pass the bill as well, potentially wiping it off the table. The republican majority is not as large, and political situation is therefore a bit uncertain.

As the potential tax reform is believed to be more or less included in the past years market gain, the state of the market is considered to be a bit hard to predict.

The long-term technical trend is still believed to be strong, and looking at the weekly chart below, DAX is trading above its 40-week moving average. The index is also showing a clear pattern of higher highs and lows, fueling further potential strength to the sentiment.

Weekly chart of the DAX                                                                                                                                     

Despite that DAX tested its support area around 12 900 – 13 000 last week, the support is currently holding off sellers. In case DAX would start moving below this area, potential further weakness could be up ahead. In case positive momentum would move the price above resistance at around 13 525, especially during increasing trading activity, this might instead signal even further strength up ahead.

Stochastic-indicator in the weekly chart is still located at a technically overbought location, and in case DAX starts moving lower, this indicator will most likely point at weakness up ahead.

Looking at the daily chart below, the Stochastic-indicator is instead trading at low and technically oversold levels. This could more likely be signaling that DAX is about to bounce, based on a short-term perspective, and that testing resistance level at around 13 100 could be a sign of potential further strength. In case positive momentum in such a case continues, breaking resistance at around all time high 13 525, could be a sign of potential further strength.

Daily chart of the DAX

In the daily chart, the DAX could be about to show weakness in case support at 12 848 breaks, but since the index is currently at an oversold location, there is a higher probability based on a technical perspective, that the index is about to bounce short-term, but does not have to be the case.

Looking at a more short-term perspective, the hourly chart below might hint of potential strength in case resistance at 13 100 breaks, or more likely 13 090 to be exact. Next level of potential strength, could be if the index starts finding ground above resistance right below 13 200.

In case DAX breaks support at around 12 848, weakness might be up ahead.

Hourly chart of the DAX                       

All in all, the trading interval between 12 950 and 13 890 is considered to be of interest in a short-term perspective.

Resistance around 13 100 is closely waiting by, as well as the sentimental 13 000 price level.

In a case DAX breaks support at around 12 848, the index might be about to show weakness up ahead.

 

 

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.

2019-12-10 08:46:02