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DAX bounces, but is it a sell into strength?


DAX Xetra (cash index)

The outlook for the DAX has taken a hit in the past few sessions as a significant risk aversion has swept through markets.

However, the key now is how the bulls can respond to a downside break of support at 12,400 which took the market to a five week low yesterday.

A two week downtrend has now formed (which comes in up at 12,635 today) but the first key test is how the bulls cope with the batch of overhead supply now in place between 12,400/12,493.

Today’s early gap higher has jumped into this overhead supply (the gap is still unfilled today at 12,396) but so far the rally has failed to ignite and remains under the 12,493 resistance.

The concern is that momentum indicators are now configured to sell into strength, with the MACD lines tracking lower, the Stochastics falling into negative territory  and the DAX is also trading below all the moving averages.

So how the rally develops today will be key for the scope of this rebound.

  • A close above 12,493 would be positive and give potential for a bigger bounce, but the burgeoning downtrend is an issue now.
  • Closing the gap at 12.396 would be bearish and likely re-engage the negative pressure once more.

 


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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.