Bottom line: DAX long term structure continues to remain bearish against 13800 resistance. The indices reversed sharply yesterday breaking below 12625 initial support. Bears might be poised to push through 12200 and 11600 in the near term.
Fundamental Outlook:
DAX had dropped over -3.67% yesterday managing to close around 12635 levels. Global markets had reversed sharply with Dow Jones, SPX500, and FTSE down by -2.06%, -1.30% and -2.73% respectively. Geopolitical risks over Brexit, COVID-19 infections rising across countries, run up to US Elections, might keep markets vulnerable going forward. The safe haven US Dollar might be a beneficiary over the next several weeks.
Gold had reversed sharply after hitting $1973 highs over the last week. The yellow metal faced selling pressure and dropped through $1882 lows yesterday as the US Dollar gained. Going further, the metal might remain under pressure break below $1862, the August 12, 2020 lows.
WTI Crude Oil prices have been on the receiving end since printing highs at $43.75 last month. Oil prices had dropped through $36.15, early this month before seeing some bids. The commodity trades just below $40.00 mark and might remain under pressure as global demand declines over a possible second wave of COVID-19 infections.
Technical Analysis:
DAX seems to be in complete control of bears after breaking below 12600/25 initial support. Intraday pullbacks remain possible but prices should stay below 13500 mark going forward. Bears might be preparing to push below 11600 support in the near term.
DAX had dropped from 13800 highs in February 2020, through 8000 lows in March 2020. The indice had carved an impulse wave dropping through sub 8000 levels. Ideally, an impulse is followed by a corrective rally and DAX had been successful in producing a counter trend through 13450/500.
DAX had faced resistance around 13450/500 levels and reversed sharply through 12750 levels early this month. Also note that the counter trend rally had stalled around 13350 mark carving a lower high. Yesterday’s drop has carved yet another lower low around 12600 levels.
Also note that bears have managed to break below its counter trend support trend line and DAX has finally entered into the sell zone. Any intraday rallies would be facing resistance around 13000/100 zone, going forward.
Most traders might be preparing to initiate fresh short positions around 13000/100 levels if prices manage to reach there. Protective stops might be placed above 13800 resistance and projected targets towards 11600 and 8000 respectively.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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