Has DAX failed to break a major high?

Good morning traders. Before we answer the question of “Has DAX failed to break a major high?” let’s check how much economic data we have coming out today. Well, it’s actually pretty light on the data release front today, so obviously Brexit will continue to dominate the headlines and the main highlight is this evening.

This evening there is likely to be a vote on Boris Johnson’s bill and proposed timetable. It’s pretty unlikely that both of these are going to be accepted, meaning it will also be unlikely for everything to pass before the end of the month. There is still a possibility that the EU may even extend the deadline beyond the end of the month, despite Boris not wanting that.

So right now, the whole situation is still absolute chaos and it’s this uncertainty that continues to distract the markets.

DAX Technical Analysis

The German DAX remains technically bullish above 12,600. However, there is a failure to break the previous high of 12,814 and this will worry traders. Especially as the market now seems to be trading in a wide range. A break to new highs today can open the door towards a test of the 12 883 high from summer last year, but we expect plenty of resistance just under 13,000. Should the market continue to trade in this wide range, there will be plenty of responsive selling and responsive buying at the top and bottom of the range.

Failure to break 12,814 (followed by a break below 12,600) opens up the door to healthy pullback, with the first interesting level being around the 450-475 zone. We are currently trading way up above the October value area (the dark area on the profile to the right-hand-side of the chart above), so if the market reverts back towards fair value, this would be a likely target zone.

The initial balance yesterday was very strong. Not only did it break above the previous day’s value area high and distribution range high, It also broke above the Point of Control from the day before that and value area high as well. The initial balance yesterday was also very wide, with very little range extension to the upside. Price closed inside the value area, the value area being in the top half of the profile.

Today we see the initial balance form within the value area of yesterday, which is not conducive to a strong trend. The longer it stays in here, the stronger this zone will be as buyers and sellers accept a balanced area of fair value. For downside targets, there is an exposed point of control at 12 533 and an exposed value area low at 12,625.