Potential Signal:
- I am a buyer on a dip, especially near the 18250 level, aiming for a move to the 18650 level. The stop loss would have to be just below the 18000 level.
- The German DAX initially tried to rally a bit during the course of the trading session on Wednesday but turned around to show signs of exhaustion.
At this point, it looks like the market is possibly going to fall from here. In order to find value, we could see the 18,250 level as an area where there's a lot of support added due to the fact that it was previous resistance. It's probably also worth noting that the recent high at the 18,647 euros level sits just above and it does make a bit of sense that as we rallied so harshly that we had to give back some of those gains. Simple profit taking probably came into the picture and of course momentum is a bit of a fickle thing at times.
With that being said, I like the idea of buying dips, especially considering that the ECB is likely to continue to see a lot of reasons to cut rates. And with that being the case, it should make stocks in the European Union do a bit better. This will be especially true in Germany, as it is the first place that people generally throw money at when they want to be involved in Europe. The DAX is the biggest economy of the European Union, and therefore it is a situation where this market is the one to watch in the EU, at least initially.
Even if we broke down below the 18,250 euros level, the 18,000 euros level is even more structurally sound, and it of course has a certain amount of psychology attached to it as well. We have the 50-day EMA sitting just below there so that adds even more credence to that area offering a bit of a floor. Either way, I have no interest whatsoever in trying to short this market and I do think that eventually we reach the 20,000 euros level in the DAX, but the question isn't so much whether or not we can, but how long will it take?
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