DAX price action – is it bounce time ?
Overnight indices erased all yesterday’s gain due to new worries spreading around markets – namely sharp devaluation of Chinese yuan. The risk-off tone stems from fears that the devaluation of yuan may encourage Trump to push for another round of tariff war against China.
DAX and other European indices opened with the gap and as I am writing this, price drifts higher. Will those renewed buys sustain or we will see another bearish leg down – yet remains to be seen. Mostly it will be decided later today when US market opens. On a weekly chart we see the price is at the bottom of price space – look at how nicely and precisely it bounced from lower border.
Stock markets are at decisive point and it is very much likely that price will make another attempt to break below 11060 and correction continues.
I would personally bet on bounce with close stop-loss some 40-50 points below previous minimum of 11060 and if long trade is in the money – move it to break-even. Sometime before US market open it will be time to revaluate situation. If and when price achieves resistance levels 11500, 11800 – time to take profits. We see bunch of downward sloped resistances above, so it is not easy for a price to progress higher.
Breaking below 11060 is a serious signal that correction is not over and next station is around 9700.
Safe trades and have a nice weekend,