DAX index – double bottom formed
Monday risk-on sentiment is intact in anticipation of US markets open. DAX index as well as overall European equities markets maintain gains with Italy demonstrating signs of compromise with the European Commission on budgetary controversies.
Markets are expecting hints from Powell on the Fed’s tightening plans and this week looks like “moment of truth” in defining market directions in many aspects. Upcoming weekend top USA-China meeting is also vitally important to understand the future of trade wars… Markets are very fragile now and news flow will decide its fate very soon.
Now, fundamentals aside, technical charts are also signaling the utmost uncertainty. Look at the weekly charts. DAX is playing with 11040 support for more than one month for now and weekly candles forming “double test” configuration – and what is more essential – at the very bottom of price line space.
What we see on weekly chart is typical reversal or bounce pattern – but the question is whether the support level 11040 will sustain or not ?
If price again goes south and tries to break 11040, it could become yet another leg down or it also could become a typical “bear trap” – with false break below and immediate reversal. Something tells me it is very much possible !
Mid-term players might want to start building longs at current levels and buying into every decline in anticipation of rally. Stop-loss orders below 11040 are mandatory in this case (better use put options to avoid gap risks).
Have a nice week ahead and profitable trades !