- The German DAX has been very noisy over the last 24 hours, as we have broken down rather significantly, only to turn around and find plenty of buying pressure.
- With this being said, I think you also have to keep in mind that the market is trying to do everything it can to break out to the upside, and the DAX will lead the way for the rest of Europe.
- After all, Germany is the biggest factor when it comes to the European Union, and therefore I like the idea of getting involved to the upside anytime again.
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I believe at this point in time, the most important thing you can do involving DAX is find value. The €23,500 level is going to be an area that would signal a breakout, but we also have seen such an overextension to the upside that I think we’ve got a scenario where people will be looking to pick up “cheap contracts.” The shape of the candlestick of course is a hammer, which if we break down below it is technically a “hanging man” and could lead to further selling. In that environment, I’d be looking to the €22,500 level for significant support. After that, then you could go looking to the 50 Day EMA, closer to the €22,000 level.
On a break above the crucial €23,500 level, then I think you’ve got a situation where traders will just simply jump into a “FOMO trading”, opening up the possibility of a move toward a €25,000 level. I do not like the idea of chasing this trade to the upside, but I recognize that as being the most obvious set up. At this point in time, I think you have to be very careful about your position sizing, because quite frankly we have rallied very far in just a short amount of time.
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