Seems the German DAX is Always at Critical Levels

• Posted by Greg Harmon
• on November 26th, 2014

About a month ago the German DAX ($DAX, $EWG) was hanging on by a thread. It has broken a key technical level triggering a Head and Shoulders top. There is more detail about the mood at the time here.

Roll the calendar forward a month and things are looking a lot brighter. Perhaps, Angela has lost her hangover as well. But the move higher in the DAX may still be a masking a future downside reversal. And it could come soon.

The chart above shows a bearish Shark harmonic in the price action. Sharks have 2 Potential Reversal Zones (PRZ), based on retracement of the original leg from X to A. What triggers the reversal trade is a move back through that PRZ level to the downside. The DAX ended Tuesday at the first PRZ.

So a move lower Wednesday could trigger it. The first target would be a 38.2% retracement of the whole pattern, which would be 9375. A secondary target at 61.8% retracement of the pattern would look for a move down to 8985. Those would be significant moves. Interestingly, a reversal back higher at the second target would start to set up a large Inverse Head and Shoulders pattern. But that is getting ahead of the market.

For now, watch for a reversal for the lower targets. If not then look again at 10150 to see what happens.

---

 

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through October 2014 Expiry and sign up here

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus