Dax Trading Thesis (Nov – Dec 15)

Fundamental Argument and Economic Calendar:

Week 1 (16th – 20th)

  • Paris attack could see RISK OFF sentiment overwhelming for the next few days
  • Fear & Greed Index has turned NEUTRAL from GREED
  • Watching how the dollar react but give reason to short the dollar here and buy the EURO
  • bias is for a pain trade
  • equity could form a low and consolidate
  • EURO CPI (low number could mean more QE needed) (high number means no need for extreme QE)
  • German Zew economic sentiment
  • US Philly Fed
  • US housing permit

Week 2 (23rd – 27th)

  • one week prior to ECB meeting
  • depending on how Euro dollar is reacting could signal a bottom in European equities
  • German Manufacturing PMI / US Existing Home sales / German GDP numbers and Business Climate index / US Consumer Confidence / US GDP QoQ / US Core Durable goods and New Home sales / Friday Thanksgiving with UK GDP YoY and QoQ

Week 3 (ECB meeting week)

Monthly

Dax monhtly

  • I have taken Elliott wave count from the chart because it hit near to the rising channel and given more QE to come we can only argue that a wave 5 is in the making
  • Wave 4 has undergone an ABC waves down but price is kept within the rising channel so this remains key and bullish
  • Only a break out of this channel will indicate a big sell off is coming
  • Elliott wave 5 has a projection for 14260 as a minimum target
  • Note the importance of the rising channel because as price action is close enough, we see either dip buying or big selling appear so this should help in our next swing trade
  • 5 EMA stands at 10635 (price did breach this last week but buying appear
  • 20 MA will be another buying opportunity if we get there at 10375
  • TAKE NOTE THAT MONTHLY CANDLE NEEDS TO CLOSE AT LEAST GREEN BECAUSE IT IS SHOWING A GRAVESTONE DOJI

Key Levels: 11070 / 10635 (5 EMA) / 10375 (20 MA) / 10050

Conclusion:

  • Rising channel so bullish bias remains

Weekly

Dax Weekly

  • If we are to take the analogue of 2014 price action with an Elliott Wave, we see a 5 wave up
  • if we copy and assume current price action play out the same way then we have an end target of 13600 assuming we break above 11080 (the November 2015 high)
  • This coincide with the top of the magenta line as the end target
  • Remember I just copy the analogue of 2014 Elliott wave and funny enough the wave 2 correction for the current price action (without moving the wave has a target close to the 100 MA which sits at 10202 at the moment
  • Funny how it also got so close to the 10050 which previously was resistance now support
  • Watch how the RSI could come into support and it is not overbought yet
  • TAKE NOTE THAT WEEKLY CANDLE IS BEARISH BUT DIPS COULD BE BOUGHT IF WE REPEAT 2014 ANALOGUE

Key Levels: 11070 / 10377 / 10202 (100 MA) / 10050 / 9555 (150 MA)

Conclusion:

  • Expect weakness next week but watch for dips as buying opportunity

Daily

dax daily

Daily Analogue 2014 Number 1

dax daily analogue 1

Daily Analogue 2014 Number 2

Dax daily analogue 2

  • daily chart shows such a big gap that needs to be filled below and there is another one above that needs to be filled as well
  • Watch how 2014 gap filled but price broke much lower to hit the 50% fib retracement before bouncing higher to consolidate?
  • Not sure if we might get the same here but it makes that 50% fib as crucial dip buying opportunity for a run higher.
  • I cannot help but see such similarities
  • TAKE NOTE THAT DAILY CLOSE HAS BREACH BELOW 10680 LEVELS

Key Levels: 11075 / 10512 / 10392 (38.2%) / 10242 (50 MA) / 10187 (50%) / 9982 (61.8%)

Conclusion:

  • expect prices to dip lower next week to retest key levels where it may prove to be a buying opportunity for a run up higher
  • ECB Draghi will need to deliver something to prove that his words are credible

4 hour

dax 4 hour

Main Conclusion

  • if analogue plays out we expect next week to see weakness and a risk off sentiment but with a dip buying opportunity for Santa rally
  • break above 11070 is a buy signal for higher Dax as it broke above the downtrend line (see weekly chart)
  • below the downtrend line, there are 2 remaining gaps that are of concern (10500 and 9600 levels)
  • Only a break below 9300 will undermine all this rising move (see monthly rising channel)
  • as long as we remain inside this monthly rising channel, the bull is safe
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