DAX Forecast: Index Bounces from Initial Pullback

Christopher Lewis

This is a market that is going to be very noisy, so you need to be cautious with your position size as I expect volatility is going to pick up.

The DAX fell initially on Wednesday but found enough buyers underneath to show signs of life again. By doing so, the market looks likely to continue to find value hunters, as the €14,400 level has offered significant support. The candlestick for the day is a bit of a hammer, so it does suggest that we could have more upward pressure, but the 200-day EMA will more likely than not offer a significant amount of resistance.

If we were to break down below the bottom of the candlestick for the trading session on Wednesday, that opens up the possibility of a move down to the 50-day EMA, which is currently sitting near the €14,100 level and curling higher. It had been previous dynamic resistance, so it should now be dynamic support. We are currently between the 50-day EMA and the 200-day EMA indicators, which is typically very noisy. It does make a certain amount of sense due to the fact that the entire economic system is currently all over the place. After all, we need to worry about whether or not inflation and global demand will continue to be difficult for risk appetite.

If we were to break down below the 50-day EMA, we will probably attempt to get down to the €14,000 level, which is a large, round, psychologically significant figure. If we were to break down below there, then it’s likely that the market could go down to the €13,300 level. The market certainly looks as if it is trying to break out and make a bigger move, but there are so many negative places above that I think even if we do rally, it’s going to be very difficult for this market to rally for a bigger move. In fact, the €15,000 level is an area that I think will attract a lot of attention due to the fact that it is a large, round, psychologically significant figure, and an area where we have seen previous support, meaning that there should be a significant amount of “market memory” at that region. This is a market that is going to be very noisy, so you need to be cautious with your position size as I expect volatility is going to pick up.

DAX Index

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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