Today's Potential signal:
The DAX is a buying opportunity on a break above the highs from the Friday session, with a target of €18,557. The stoploss would be at the €17,912 level.
The German DAX initially tried to rally a bit during the course of the trading session on Friday, only to turn around and show signs of weakness. By doing so, the market has broken back below the €18,000 level, and will have probably shaken a lot of traders out. Quite frankly, stocks got hammered during the session on Friday across the world, so this is no different than any other index.
The next support level is closer to the 50-Day EMA, which sits right around the 17,250 level underneath. It’s also where the 38.2% Fibonacci router and a level that a lot of people will be paying attention to in general. If we can get some type of bounce from that area than it’s worth buying again, because despite the fact that this is a bit of an ugly pullback, the reality is that we are still very much in a significant uptrend, something that cannot be fought at this point.
European Central Bank
At this point, it looks like the European Central Bank is going to be cutting rates in the next couple of months, and that of course could have a major influence on German stocks, because not only is Germany in a recession, but this is also the first place people typically throw money into the European union through. The DAX features a lot of exporters, and that of course makes a huge difference as to where we see this market trade. If German goods become cheap, then it makes a lot of sense that companies in Germany will start to do fairly well.
If we do break above the top of the candlestick for the trading session on Friday, that would be a very bullish sign and could send the DAX back toward the highs again. However, you have to be very cautious with the type of whip salt trading that we have seen on Friday. Quite frankly, I anticipate a lot of people probably got stopped out during the day due to the volatility. That being said, this is a market that hasn’t changed its overall dynamics despite the fact that Monday was such a punch in the face.
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