Dax Technical Analysis 22/03/2016

Hello traders!

I haven’t been doing any trading for the last few days because I have been away, so I will keep the article simple today.

The market has been bearish April 2015 and we are still in the bearish trend channel on the weekly chart with the candles suggesting that we may have found a high at 10,000 and soon begin the next descent. The bullish case, which currently supports price is simply the underlying QE theme after the ECB expands the programme, but also the retail SSI shows over 70% of traders are short, which often creates the opposite effect, temporarily. So if I was a bearish swing trader and wanted to take up a position, I would look for a final rally to 10150 before falling sharply.

We are currently sat around the 50% fibonacci retracement from the November-February swing and bearish traders are looking for the bearish signal to show the reversal of the recent bullish trend, which is still intact, especially after taking out 9,900. Price has not been able to gain a foothold above 10,000 and is rejected, but support is beginning to build around 9,800. A short from current position would need a stop loss of around 10200 meaning a risk of over 300 points. Targets would be 9500 or approximately 400 points, so risk vs reward right now is not great. I would be waiting for a better price. Would I go long from current position? No, I want to see a break above 10,150, because right now we are treading water. But even if we take out 10,150, I see price action slowing at 10,300 so there isn’t a massive opportunity. It seems the big points are on the short side, but I want to get in at a higher price.

On the four hour chart, the bullish trend is still present, but currently under pressure with a double bottom confirmed at around 9750. We have been trading in a range for the last two weeks, so the market is not really doing anything right now. We are in the middle of that range so I would just avoid the market for the moment.