DAX Technical Highlights:
- From near new multi-month highs to key support
- Bounce-back may come here, if not then more selling to come
- 1-year ‘head-and-shoulders’ pattern still on the table
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It was just three trading sessions ago that the DAX was on the verge of trying to climb to its best levels since early February. However, it failed to do so after nearing the May peak and making an intra-day breach past the trend-line running off the record high.
The three-day skid took out of all the choppy price action leading up to it now has significant support around the 12600/550-area in play. It’s an important area to hold given the amount of attention it’s received since February. First it was a spot of resistance, then recently it became support.
If the market is headed for a range-bound environment, at the least, then this is the spot for ‘would-be’ longs to look to enter, as the backstop for positions is just below. However, a break would be somewhat significant and turn a solid area of support into a new form of resistance, giving shorts the upper hand.
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DAX Daily Chart (At solid support)
We’ve discussed this scenario before, and we’ll touch on it only briefly now (and again in the Q3 forecast), but a head-and-shoulders pattern could have just cemented the right shoulder. From here we would need the May high maintain and start seeing a downhill move beneath the neckline situated in the high-11700s. For now, it’s only a big-picture scenario, but one we could soon be discussing in detail given its ominous implications.
DAX Weekly Chart (H&S Pattern still in the cards)
Back to the short-term picture, the DAX is sitting at support, and we must respect that for as long as it holds. Only a break at this juncture will strengthen a negative bias. For live weekly updates on the DAX and other indices, join me live on Tuesdays for ‘Indices and Commodities for the Active Trader’.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
