05-12-2017 Dax Technical Analysis

Good morning traders and welcome to the 05-12-2017 Dax Technical Analysis. No signals were sent yesterday; Monday tends to be a quieter day than most. There was also no article yesterday, so let’s take a look at the swings. It is always good practice to check up on the swings and their structure to see if any significant changes have happened.

Practicing our swing work is all in line with the Alan Andrews course (that we recommend to everyone). The more experience we gain working with swings, the better our trading will become. We can do this kind of swing work on any time frame and any market.

Take the image above as an example. I have marked out groups of three essential swings or pivots, which we can use to pull forks. These forks can help us understand areas of interest for price action. I like the ABC fork; I like the 123 profit line, the i ii iii fork and even the abc fork. See the video below which will discuss that further.

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05-12-2017 Dax Outlook

Majors (Chart 1)

The major swings are under pressure with the price action threatening to break to the downside. We are currently inside a large value area ranging sideways and waiting for the next leg. We have marked out two potential target areas, depending on which way this thing decides to trend.

Target Zone 1 is the bullish case. The bullish case is based on price action reaching the UMLH (upper median line parallel) and the P0 to P5 expansion.

Target Zone 2 is the bearish case. The bearish case is based on price action reaching the LMLH (lower median line parallel) and a ZigZag pattern from the P5 high, with the current sideways price action acting like a 50% balance point. The target zone 2 is the extension of that Zig Zag.

Minors (Chart 2)

The numbers are referring to the bearish trend; the capital letters are referring to the minors swings after the bearish trend was broken. We were expecting a new bullish trend to form at this point, but it did not.

We have drawn a form from D E and F (bearish sloping fork, regular pitchfork, with the quartile lines included). We have also drawn an ACR line set using points C and E (for the centre line) and F for the Action line. Notice how price action touched the Reaction line at point G?  I also personally like how the price bounced from the median line (ML) after point F, zoomed through the ML before bouncing from point G, and then gapped it to bring us closer to the present time. These lines are still being respected.

We are currently sat on the centre line (again) right at the UMLH.

Bulls

The strength of the break lower is a concern, so any long at this stage is considered ‘catching the knife’. There is a definite risk that this momentum is strong enough to break the significant swing low and if so, we go back to a bearish trend. At the moment any long would be considered counter-trend.

We have pierced the 12900 level and reacted, it’s possible that the daily low gets another test and if that holds, it can offer a fade buy opportunity. A minimum of 4:1 would be necessary to justify the risk.

A glimmer of hope for bulls is that this aggressive sell-off today could be seen as an [A]ction point using Alan Andrew’s work. We also have a defined [C]enter line above, so if we see an equal and opposite [R]eaction, then we have the ACR line set to put on our chart, and a trade setup begins to form. But it’s weak.

Bears

Congratulations to those in the premium group who carried their shorts from yesterday.

Clearly in control at the moment and there are many opportunities to get short. If you are not already short, then it’s best to wait for a pullback to get in (or reload). A pullback to the underside of the breakout area is the most obvious choice (the ‘kiss goodbye’).

Longer term targets could be the 12600 value area visible on the daily chart, but that may be getting ahead of ourselves. We are technically still technically inside the value area on the daily chart, despite this break out of the minor consolidation.

05-12-2017 Dax Charts

Chart 1

Chart 2