Dax Technical Analysis 03/02/2016

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Good morning traders!

Strong bearish candle delivered printed yesterday and to many this will signal a move towards testing the major low again. The question is, will we create a double bottom reversal pattern at major support, or is this the time we break through and begin our descent down to the 9000 and below.

One interesting observation I have made is that the last five days of daily candles have formed a 2 1 2 pattern, now you may already have opinions on this type of candlestick pattern, but the fact remains that it’s a fairly high probability trading pattern. Feel free to research the strategy yourself, but if the Dax does conform to this pattern then today will be bullish?

(We’ll have to wait and see about that, the market looks pretty heavy doesn’t it)

I have been studying oscillator divergence strategies recently to see if there is any way of incorporating that into my trading on the Dax and I like the simplicity of the strategy. However I noticed some conflicting signals this morning which has made me question a few things. For example we had classical bullish divergence yesterday afternoon around 4pm GMT, but this morning classical bearish divergence, so which takes priority? Presumably whichever is following the overall trend. Equities appear bearish at the moment, so perhaps that’s the underlying trend to pay attention to, except that the 212 strategy suggests today will be Bullish, so I’m just paralysing myself with too many options I think. It makes me realise that the strategy should have some basic rules, which I will need to research. Suggestions welcome.

On the 30 minute chart, we were in a wedge formation and we have clearly broken that to the downside. Not only have we cleared the wedge pattern, but we broke horizontal xupport at 9557 and are currently testing that from the underside as I type this article. A move higher towards 9650 before a further decline could be interesting to watch, as price action tests the underside of the broken wedge, this is also previous support since late January.

The H4 is bearish below 9930 and pointing down, it looks like it wants to keep heading lower as it prints lower lows, but it has reached the bottom of the Bollinger band and is about to tag it, if we don’t get a walk down the bands then it supports the case for a bounce.