Dax Technical Analysis 22/03/2017

Good morning traders!

An eventful day in the markets, not in my personal trading, because I barely did anything but watched from the sidelines, but I saw a lot of bulls get burned.

US stocks suffered their worst day year to date, the Dax also lost over 1% in a single day and the candle from yesterday looks incredibly bearish doesn’t it. When you consider the bearish divergence that formed at the end of February, it would be very easy.

According to newswires, ECB is seeking to fast track their exit from London following Brexit, with license applications to be fast tracked and will also temporarily waive examinations of financial models used to determine risks if banks meet British regulatory standards and a poll showed Macron increased lead for first round of the French presidential election at 26% vs. Le Pen at 24.5%, while 2nd round poll showed Macron at 64% vs. Le Pen at 36%.

Once article 50 is wrapped up and the negotiations begin, I suspect we will hear more stories like this, but the EU to threaten the UK with court action if Theresa May refuses to pay GBP 50bln Brexit divorce bill and Theresa May is said to deny opening any negotiations with Scottish ministers regarding a 2nd independence referendum.

There has been plenty of releases on the newswires around the Fed rate discussion: Fed’s Kaplan (Voter, Neutral) stated 3 US rate hikes for 2017 is a reasonable baseline case and the Fed is still accommodative. Kaplan added removing accommodation should be done in a gradual and patient manner, while he sees further to go on rate hikes before shrinking the balance sheet. Fed’s George (Non-Voter, Hawk) stated that the Fed is moving into a critical time right now and the process of re-calibrating monetary policy can be more challenging that easing. Fed’s Rosengren (Non-Voter, Hawk) stated global regulators may need to act if low rates and a ‘reach for yield’ results to financial problems. Rosengren added it is difficult to slow real estate price increase with interest rates and that regulators should consider other tools to protect the economy from real estate run-up. Fed’s Mester (Non-Voter, Hawk) stated she built in over 3 rate hikes in her projections for this year and would be concerned if there were less than 3. Mester also commented that the Fed has not made any decisions on changing balance sheet policy and that they will not aggressively shrink the balance sheet. Make of that what you wish.

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If you’re interested in receiving live trading signals for the Dax, come and join the community. Three months of signals will cost £94 and can be purchased using this link: https://www.paypal.me/DaxTrader54/94 . In the meantime come and join my broadcast channel on Telegram messenger, it’s here that I broadcast additional Dax analysis and messages to my readers and subscribers. For the rest of the month, it is very easy to get access, please download the Telegram messenger (from www.telegram.org) and then click this link: https://t.me/joinchat/AAAAAEAypsW3Xet_6ngBlw

Dax Daily Chart

The recent ‘slow’ price action has certainly ended after yesterday. We have broken below 11910 which could have been classed as a trend defining level, opening the door to a move lower, perhaps 117xx. Unless of course this is just price pressing into support and using it as a springboard to rally higher. Either way, price has passed my bullish ‘line in the sand’ so I am now watching for the next wave.

The algorithm is still bullish, so I have switched it off temporarily, hence why no signals were sent out yesterday, otherwise we would have been buying all the way down.

01 Dax Daily Chart

Dax Hourly Chart

You can see on this chart that price has rested on a major support level, perhaps only for a short while. This level is historical support and there is confluence around this area with a fibonacci retracement level. We are currently oversold, at support, so it’s an opportunity for bulls to buy at a decent price, the question is whether this is the end of the pullback, or not. If it is, great, there is a good reward:risk setup there. If it’s not, then the stop loss probably needs to go below the next major support level (the next thick black line) and this means the risk is significant and the setup is barely 1:1.

I would expect us to see a retracement of this bearish activity soon so I am watching for divergence signals on the lower timeframes. I tend to find that it often happens just as people begin to jump on the momentum. So as soon as you hear people say “sell, it’s time to sell”, it’s often a good spot for a retracement in the opposite direction. I know that I am just being facetious, but there is some truth to it.

03 H1 Dax Chart

Dax Intraday Chart

And there it is. Divergence exists on the lower time frames, we are below the Bollinger band as well, so ordinarily, I would take this signal. However, there was a similar signal yesterday too, which would have failed, so there is no certainty here. But no strategy or system is ever 100% successful all the time and I would happily argue that with anyone… Preferably with beer, rather than on Telegram during the day.

05 Dax m5 Chart

Dax Support & Resistance