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Bearish engulfing candle changes the tone for the DAX

DAX futures (Dec 2017 contract is FDXZ7, continuation contract is FDXc1)


After yesterday’s strong decline, this is the first real test that the DAX bulls have faced for several weeks.

A bearish engulfing candle (bearish key one day reversal) has significantly changed the tone of the bull run.

The market has been trending strongly higher for the past ten weeks but the near term reversal pattern could now begin to usher in some profit taking.

For now, this is largely an isolated bearish signal but the momentum indicators are notable less positive now.

The cross lower on the Stochastics (which is yet to be a confirmed sell signal) along with the MACD and RSI losing impetus are warning signals.

The reaction of today’s session could though be key and initially the bulls have pulled higher in the early moves of the session.

  • However a second close lower on the day would increase the concerns, whilst a move below yesterday’s low at 13,335 would also increase the corrective momentum.
  • There is initial support at 13,311 but the gap is at 13,250 whilst a retreat to the uptrend (currently 13,165) would be increasingly likely if the market again closes lower today.

ON the hourly chart, momentum is not decisively correctively currently, but as with the daily chart, the impetus for profit-taking would grow with another negative move today.

  • Initial resistance is around 13,440/13,450 with the all-time high is at 13,533.

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