Is The DAX Ready To Make A New High?
FX Trader’s EDGE | Oct 23, 2016 02:29AM ET
In this article, we take a detailed look at the DAX, and bring in the EUR/USD as well. The DAX CFD is trading at 10711 at 12 pm EST on Friday, October 21, 2016, approaching the August 15th high at 10807, which is also the channel resistance, as illustrated in the above 4-hour chart. Also on this chart, one can see various support and resistance lines, which I would like to highlight below.
Above current levels, resistance areas include the following:
Weekly R1 pivot point 10740
Yesterday’s high price 10749
Daily R1 pivot point 10777
August 15th high price 10807
Monthly R1 pivot point 10813
Daily R2 pivot point 10843
Weekly R2 pivot point 10891
Daily R3 pivot point 10936
There is a fair amount of overhead resistance on the DAX. Traders will look to go long on a break of the recent high at 10749 and again at 10807. But is that the right call, or should the move be faded? Let’s have a look at the Elliott Wave count for guidance.
From an Elliott wave perspective, we see this move as the end of a 5-wave sequence (ending diagonal) to complete green wave C, orange (Y), red Y and black b. We would therefore look for a confirmed reversal once this cycle is complete, which can be a 123-reversal pattern with reversal candlesticks. While the DAX will likely attempt to test those mentioned levels of 10749 and 10807, if price fails and reverses, look at the following support levels to guide the move down for the black wave c.
Below current levels, support areas include the following:
Daily pivot point 10684
Daily S1 pivot point 10618
Yesterday’s low price 10590
Weekly pivot point 10544
Daily S2 pivot point 10525
Monthly pivot point 10499
Daily S3 pivot point 10459
Looking at the EUR/USD and DAX correlation, there is a very strong negative correlation in the last trading week, with the EUR/USD making new lows and the DAX making new highs. While this isn’t a usual pattern, it might be interesting to go with that for the next week trading week. See the Daily chart below with the EUR/USD overlay on the DAX.
Get The News You Want
Moving down to the 1-hour chart below, one can see the negative correlation playing out on this smaller time frame. For the upcoming week, follow both markets as the DAX continues to test higher resistance levels noted above and the EUR/USD continues to test lower levels. It will be interesting to see if the EUR/USD finds support when the DAX completes its Elliott Wave cycle.
For this week, I encourage you to test your skills with this Elliott Wave analysis while keeping your risk and emotions under control. Have a clear plan and trade your plan. We wish you success in your trading business.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.