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Can an inverted hammer candle on the DAX signal a recovery?


DAX Xetra (cash index)

It is a difficult time to trade equities and the DAX is no different as volatility has pulled strongly higher in the past couple of weeks.

After the recent sell-off, there was a false start to a potential recovery yesterday which will leave traders a touch more wary today.

Is the early rebound anything more than a dead cat bounce?

Yesterday’s candle was an imperfect “inverted hammer” which could now signal a recovery, but it depends upon today’s session.

The candle shows an intraday rally that failed and subsequently closed towards the day lows.

However if today’s session remains positive then it would signal the bulls regaining confidence again, which would validate the rebound as a viable reversal.

The open higher today has slipped back and there is currently a negative candle on the daily chart, so we need to be cautious still with the potential for a recovery.

  • The fact that this is all playing out under the significant overhead supply of 11,726/11,865 should also suggest caution.
  • Despite this though, on the hourly chart there is a potential small base pattern which would form on a decisive move above 11,700.

The hourly RSI above 50 would help improve the outlook also, but needs above 60 to really suggest momentum improving strongly.

For now this is a rebound very much being questioned by the market and with hurdles to overcome.

But at least the panic selling seems to have dissipated this morning, which is a start.

 


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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.