In yesterday’s Daily Market Update (Draghi and ‘de DAX’), the Chart of the Day section featured two German DAX30 charts.
“The DAX is a stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange.”
Naturally the Volkswagen emissions scandal has had an effect on the DAX and I wanted to take a look at the charts in more detail here.
The weekly chart sees the dominating technical theme being the major bullish trend that has been in play for years now. After getting a little parabolic, more recently we’ve seen price pull back down to test the trend line that we have drawn from 2011 and 2014 lows.
With price testing trend line support for the 4th time, the bulls are starting to look a little shaky. The fact that the 4th test of the level is so close to the 3rd just adds to the case that the bears are starting to take control.
Zooming into the daily chart, we have seen price break down through a short term channel/flag, and then re-test broken support as resistance. It was here that the Volkswagen scandal hit and price has quickly dropped down to major trend line support once again.
I found it interesting that Deutsche Bank has also revised its DAX forecast for both 2015 and 2016, now expecting the index to end the year at 10300. This is significant because it is 1000 points lower than its previous forecast for the year, but an expectation that the major weekly trend line will hold.
Do you expect buyers to come into the market at these levels, or are we going to get a hard breakout to the downside?
Dane Williams – @VantageFX
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