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FX Empire Editorial Board

The German DAX has struggled to gain further momentum after the index posted its YTD highs in the earliest parts of 2018. The broader bearishness found in global stock markets over the last six weeks has weighed heavily on this European stock benchmark. Global trade tensions and potential debt contagion from Europe’s weaker economic regions has added to the uncertainty and prevented potentially bullish investors from buying on dips.

  • Critical Resistance:   11,955.60
  • Critical Support:   11,051.05
  • Trading Bias:  Bearish
  • DAX technical Strategy:  Sell Rallies

This sentiment is being reflected on the price charts, and the DAX has now fallen through the neckline of a critical-head-and-shoulders pattern on the weekly time frames. A confirmed head-and-shoulders pattern will typically project a deep retracement which is roughly equal to the price distance between the head and the neckline.  This suggests the DAX still has deeper to fall, and this outlook shows additional confirmation through several other chart indicators.

DAX Weekly Chart

Specifically, we can see that the DAX has fallen through all of its major moving averages. Negative momentum in terms if the exponential moving averages have helped generate bearish indicator readings on the CCI. Moreover, the indicator has actually moved back into neutral territory within the mid-range, which suggests the DAX has plenty of room to fall further as we move ahead into the final weeks of the year.

Most likely, we will need to see more hawkish commentary signals from the European Central Bank (ECB) in order to see sentiment change in ways that positively influence price valuations in the DAX stock benchmark.  Until that occurs, stock traders can expect to encounter resistance at 11,955.60.  Support levels below in the DAX valuation can be found at the 11,051.05 level, a break of which could accelerate losses for the benchmark.

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