DAX Hits Channel Resistance and Breaks Channel Support

By Jody Samuels

In this article, we take a detailed look at the DAX, and review last week’s analysis. The DAX CFD is trading at 10699 at 12 pm EST on Friday, October 28, 2016, after testing the upper channel line at 10831 on October 25th. Last week we drew the channel line and marked the August 15th high at 10807, noting resistance at the upper channel line and a possible level to fade the move. We stated last week: 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.  Indeed, traders bought the DAX through those levels and found that price couldn’t break and hold above channel resistance. On the hourly chart, we had a nice evening star candlestick formation which reversed price and the market quickly retreated to test the lower channel line as displayed on the 4-hour chart above.

Typically, we like to see a break down and retest of the channel line, which is what we had, and currently the DAX is in defensive territory and could see lower levels.

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:

Daily pivot point                  10709

Daily R1 pivot point             10772

Yesterday’s high price          10774

August 15th high price          10807

Monthly R1 pivot point         10813

Weekly R1 pivot point          10818

Daily R2 pivot point             10838

From an Elliott wave perspective, we said last week: 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.

Indeed, we saw the reversal candlestick pattern and the 123-confirmed reversal such that now, the DAX is playing out black wave c, which should test lower levels. Below current levels, support areas include the following:

Weekly pivot point              10653

Yesterday’s low price           10648

Daily S1 pivot point             10644

Daily S2 pivot point             10580

Weekly S1 pivot point          10557

Daily S3 pivot point             10515

Monthly pivot point             10499

We follow the DAX daily in our Elliott Wave Desk service, along with 12 other markets from currencies to commodities to stock indices. Elliott Wave analysis provides the direction, the view and the context. It is up to you to use your strategy to confirm your trades.  To follow our daily Elliott Wave analysis on 13 different markets, sign up at elliottwavedesk.com.

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.

 

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