Good morning traders. The DAX index managed to break below (and close below) its value area low late last night and one of my questions today will be whether we will see the DAX return to the point of control at 12756. At the time of writing, the market has just tagged the daily pivot of 12724. The reason why the point of control is so important is that the market was happy doing business there. It would be an area of balance to which responsive traders believe the market should return. And considering the light economic calendar today, you could certainly see a case for that return to the point of control.
|Point of Control||12756|
|Value Area High||12766|
|Value Area Low||12740|
What if DAX fails to return to the point of control?
The DAX has a number of downside targets to watch, but there is a large assumption that it manages to continue the bearish momentum and break below a large high volume zone (arrowed in the chart below) and also break below the trend defining 12600. That’s not an easy job, with a light economic calendar. So really the only catalyst (ignoring an emergency) would be a release from the EU regarding the Brexit extension and an unexpected reaction from the UK government.
DAX Signalled A Downside Break
Notice how the price action yesterday gave a warning of its intention to break lower. The first sign was after a break above the down-sloping high-to-high trend line. The failure high which I highlighted in blue was tagged again later in the session followed by heavy selling pressure.
DAX Market Profile
This chart also shows the point of control at 756. Yesterday the initial balance formed inside the value area of the previous day. The value area yesterday formed inside its initial balance. We saw a failed range extension to the upside, but a successful range extension to the downside yesterday and price closed near the bottom of the distribution range printing a version of the normal variation day.