DAX Forecast: Attempting to Test Support Level

Christopher Lewis

This is a market that is in an uptrend so even if we do get a significant pullback, that pullback will more than likely attract a certain amount of value hunters out there, as trend traders will jump in. 

The DAX initially gapped higher to kick off the trading session on Thursday but then gave back the gains to form a bit of a shooting star. This is a very ugly candlestick, and I think it does suggest that we are going to see negativity and therefore it is likely that we are going to see an attempt to test the support level underneath. The 15,000 level underneath will more than likely be paid close attention to as it is a large, round, psychologically significant figure and there is a huge gap in that general vicinity that will also offer support. Beyond that, the 50 day EMA is starting to reach towards that area, so I think it is only a matter of time before we get some type of buyers underneath.

All things been equal, this is a market that is in an uptrend so even if we do get a significant pullback, that pullback will more than likely attract a certain amount of value hunters out there, as trend traders will jump in. After all, larger traders will continue to look at these as buying opportunities. The DAX is a “blue-chip index,” that a lot of people will flood to when they are trying to play the reopening trade, because Germany is such a huge supplier of industrial goods. If the rest of the world is opening up, then the DAX will be one of the first places that European and foreign traders will flock to.

Furthermore, the German economy is identified as the main engine the European Union, and therefore it is a way to play the strength or weakness of the European Union by a lot of traders. At this point, it looks as if the ECB announcement and lack of action by the bank suggests that the market was very disappointed. That being said though, we are still very much in an uptrend so I would anticipate that there are lot of value hunters underneath, and therefore I have noticed in shorting this market. In fact, with liquidity measures being pumped out by central banks around the world, including the ECB, it is very difficult to imagine that there will be anything more than a short-term correction ahead of us. To the upside, I anticipate that this market may go looking to 17,000 given enough time.

Dax

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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