Dax Technical Analysis 26/10/2016

Hello traders!

I am sure many DaxTraders have spotted the interesting candle formation on the daily chart which is signalling a reversal (or at least a pullback) to the downside. When you also take a look at the SnP500, USDJPY and the US Dollar Index, you can see some similarities in direction and of course Gold is still rallying as well, which generally shares inverse correlation with equity markets. So I have decided to turn my trading algorithm off today (which is currently Bullish) and looking for selling opportunities.

Intra-day, we have some support around the 10725-10735 zone (daily S1 on the pivot point indicator and also the 61.8 retracement from the 21st October – 24th October swing. But if we take that out, it potentially opens the door to 10700 and lower. I imagine many longer term traders have identified a short with stop loss above recent highs and targets near to the retracement zone discussed below.

So let’s look at the charts.

The daily chart is looking toppy with the reversal candle formation playing out currently. The only risk being that with everyone jumping on the selling bus, price often has a habit of turning against general sentiment. So manage your trades carefully.

The H4 chart is interesting only because it has broken the rising trend support and if we take a Fib retracement from the very low of the recent move to the recent high, we can see a retracement zone between 10531-10644.

The H1 chart shows a few levels of previous resistance that may now provide some support on the way down, if price does indeed continue to fall. So it’s unlikely to collapse 200 points straight down, but instead bounce from some of these levels first, before moving lower. 10700, is the first level of support, the 10645. Mark those levels on the chart.

The m30 chart shows a break below the 34 hour EMA for the first time in a while and shows the start of a trend that is about to break. Technically you could say that the trend defining level is actually around 10665, so until we break that, we are still bullish. But I anticipate a break lower and my personal trading will start to reflect that.

The m5 chart shows that we have now broken through the support levels I mentioned towards the beginning of the article (the daily S1 and the 61.8 retracement) and momentum is picking up. Price doesn’t often break too much lower than the daily S2, but if it does, then we will put pressure on the trend defining level.