Potential signal
I am waiting for a drop to the 200 Day EMA, and a bounce.
At that point, I am a buyer of the DAX but would have a stop loss of no more than 100 points.
I would aim for the 25,000 area.
German DAX fell on Tuesday as we continue to move on the latest nonsensical headlines coming out of the Middle East. With participants in the talks unwilling to actually meet during the session, it suggests that we are going to continue to have to worry about the energy supply heading into Europe.
If that is going to be the case, I think you have a situation where if we fall from here, the 200-day EMA could be tested just below the 24,000 level. Market participants continue to look at short-term pullbacks as buying opportunities from what I can see, but we also have to keep in mind that the market participants also have to pay close attention to the way interest rates are moving in Germany.
They are roughly around 3% on the 10-year yield, and of course the idea of whether or not there could be peace in the Middle East. It certainly looks like things have taken a turn for the worse, and shooting could be again, yet again, in 24 hours.
Top Regulated Brokers
V-Pattern and Position Sizing
Ultimately, I think this is a market that will remain very noisy and very difficult to trade, but I still favor the upside because we have seen such a massive V-pattern. Expect choppy and erratic behavior, but I could say that about most assets, not just the German index itself.
Quite frankly, just about anything else could be looking at a situation where the position sizing is the only thing you can do to protect yourself. Ultimately, I think this is a market that will eventually find its way back to the upside, but I'm not willing to just jump in out of the blue. If we can test the 200-day EMA and bounce from there, then I probably will put a small position on.
Ready to trade our stock market forecast and analysis? Here are the best CFD stocks brokers to choose from.