Dax Technical Analysis 24/01/2017

Good morning traders!

The new US president has stopped the TPP trade agreement as one of its first official meetings and made further assertions regarding taxation (corporation and import) and there were yet more suggestions that the US dollar is too strong, so love for the dollar is very low at the moment, which would explain a lot of the weird behaviour on the FX market.

Yesterday on the Dax we opened from around 11618 with a gap lower and after the first hour of trading, had lost over 100 points, the price was held by the daily S2. After this initial bearish activity, price turned around but the gap did not completely close and we remained below the daily pivot for the rest of the session. Over the last week or so I have been talking about the 11530 zone as a potential buy zone, with bullish traders choosing that area to go long. Yesterday this area was tagged twice, reacting to each of them and providing that opportunity for traders. We closed pretty much on the daily S1 yesterday and this level has become the daily pivot today.

On the daily chart, we posted a [weak] bearish, engulfing candle, but trading still remains trapped in a narrowing range. Trading has not closed below 11545 or above 11660 since trading began at the beginning of January.

On the hourly chart, we can see the range more clearly and I have highlighted a simple RSI (8) strategy, that allows us to buy the oversold and sell the overbought areas. A neutral, default settings, RSI indicator tends to work best in a range. The challenges with a strategy like this are waiting until a range forms because, by the time good range forms, price is ready to break out of the range. However, in the case of the Dax, the range is still holding. The other challenge is, you can visually see the buy zone and sell zone, so why would you need an indicator?

On the market profile chart, we are currently in the middle of the value area, “no-mans-land” basically, right in the middle of the trading range. Price is trading near to the POC (point of control) and it’s notoriously tricky to get a good reward to risk setup from this area.

So I shall remain patient and wait for the setup to present itself. My bias is neutral, but I would like to buy from the bottom of the range.