Hello traders!
And finally the gap closes! Where next?
We have broken below 11500 and are now around 11450, which was a buy zone for me from a week or two ago. I am now interested in looking for a position, so will wait for a signal to confirm it. 11385 seem to be a popular spot for stop losses so I am now wondering whether we may pierce that, to clear them out before turning around. We have been consolidating for some time now, therefore the oscillators appear as heavily oversold currently, at the time of writing, suggesting we have a high probability of a reversal to the upside, but momentum is still strong at the moment.
Today around 11:45 GMT we have Theresa May speaking and she is expected to say that she is seeking a hard Brexit, so we can expect further volatility on the GBP pairs. Trump has made suggestions that the US currency is too strong making competing with China difficult, perhaps this has contributed to the short term weakening of the Dollar and Gold rally. So we can expect speculators to be listening out for further policy clues leading up to and after Inauguration.
We talked yesterday about three scenarios:
Scenario 1 – Bullish continuation (needs a break and hold above 11680 targeting 11800-12000)
Scenario 2 – Market correction (needs a break below 11495, targets range between 11100-11400)
Scenario 3 – Rangebound market (mainly ranging between 11530 – 11630)
So right now we are playing Scenario 2, market correction, we’ve broken below 11495 and now we need to look for targets. I am reluctant to sell the market, (which may frustrate sellers) but happy to wait for a buy at a lower price. We have the weekly S2 at 11395, this could interesting as it was a support level late in December ’16 and the market also consolidated in this zone.
I am watching the 11400-11425 zone closely and watching for 11385 to hold. If it doesn’t then the door can open to lower prices, but I also think that 11300 has been significant in the past so if we break below 11385 and retail traders pile in, to go short, expecting 11100 and lower, this 11280-11320 zone could slow price down.
Today the dominant story is the gap close. Intra-day we are below the daily S2, how much further do we really go from here?
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Dax Support & Resistance
| KEY LEVELS | |
| Daily R2 | 11642 |
| Daily R1 | 11599 |
| Daily Pivot | 11564 |
| Daily S1 | 11521 |
| Daily S2 | 11485 |
| 200 Day EMA | 10637 |
01 Dax Daily Chart
