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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.

DAX weekly Oct 26

DAX weekly chart

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,

Fuad