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
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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.