Good morning traders, let’s consider some candidates for a DAX retracement target after looking at the main stories. Today, it seems Brexit will continue to steal the spotlight with the ongoing negotiations paving the way for a potential deal before the EU summit tomorrow. The probability of a deal is still low, in fact very low, perhaps the kind of odds you would not even want to risk your own money on if you were presented them in a casino, but both sides have been working through the weekend. Sources have said that there is no breakthrough, despite the Irish being optimistic even though the Northern Irish DUP (still very important for the current government) have rejected the current proposal. It will continue to be the main developing story this week.
In addition, pay attention to the trade negotiations between China and US. Phase one is now complete, but there is plenty more work to do and plenty more tweets to send from you-know-who.
Equities on major stock markets in Europe opened lower on Monday amid Brexit-related uncertainties. Irish Foreign Minister Simon Coveney warned “tough issues” needed to be solved before a deal on the United Kingdom’s withdrawal from the European Union is reached. On data, Eurostat was set to release a report on the bloc’s industrial production later during the day.
DAX Retracement Target
The DAX index is clearly technically bullish, but has just rallied over 500 points with no pullback, reaching a high of 12,550. There is also an interesting low at 12,420 which seems to be temporarily holding price. So for now, I will continue to watch those levels.
A break lower opens up a move to 12,400 which is a small higher volume zone (visible on the profile to the right), and then a further DAX retracement target below that would be a wide low volume zone all the way down to 12,240. There is no guarantee that we will reach that level, but a corrective pullback would not be unusual. This would run straight into the upsloping low-to-low trendline you can see on the chart.
A break above 12,550 is interesting because you would have to look back to July to find resistance, but you may recall the DAX had difficulties breaking much above 12,600, so that’s an obvious barrier. Breaking above 12,550 and then 12,600 today, after the Friday rally, without a pullback of some kind seems less likely, but we’ve seen the DAX defy belief before.
DAX Trading Strategy
DAX Index Key Levels
|Point of Control||12450|
|Value Area High||12512|
|Value Area Low||12370|