Dax Technical Analysis 20/10/2016

Good morning traders!

Today may provide the catalyst that traders need for price to break the recent range. We have ECB meeting and press conference later which will likely provide plenty of volatility. The opposing forces are QE tapering vs QE extension and all eyes are on EUR and the EU equity markets.

On the five minute chart we can see that we have closed the gap that opened first thing this morning. 10 650 is currently the short term support level, if this holds price may look to test 10 700 once more, if this falls and price breaks below the daily pivot, then this may open a move down to 10 600.

On the 30 minute chance you could argue that we are seeing ascending wedge formation, with a rising trend support line and horizontal resistance at 10 700. Looking at the divergence between price and the MACD indicator, there are three peaks 14th October, 18 October and 20 October, Price is making the higher highs but the indicator is making lower highs. Bearish divergence.

I was looking on the one hour chart, zoomed back to August, to see if I could find other examples of bearish divergence. I have highlighted three separate times where there were three higher highs in price but the oscillator did not create additional highs and so price action declined. I wonder if we may see something similar again now.

The H4 chart is still pretty bland and what we need is a catalyst to create a breakout opportunity.

Bears will find a good opportunity to short from current levels with a stop above the recent swing highs, however if we break above that we could head up the 10800 level before finding the next shorting opportunity as it creates a triple top. Targets for bears right now range between 10350-10580, but they are queuing up ready for a drop. But, as we know, when sentiment is strongly in one direction, price often goes the other way.

Keep it simple, wait for the QE outcome later.