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DAX: a battle between bears and bulls
At the end of November 2015 the Dax Index was trading over the 11,000 points mark. Just a few weeks later, in the last days of January 2016, it reached a 15 month low, close to 8,700 points.
Fears of a Chinese growth slowdown, the fall in oil prices and concerns about the general economic climate were the main reasons for this quick and strong movement.
After the bottom was reached in the second week of February, the trend changed and stock markets started to recover again. The rise continued in March, aided by the ECB announcement, to enhance the existing stimulus measures implemented by the European Central Bank. The success of these stimulus measures will probably be one of the more important market drivers of the next few months for the European Indexes.
We also have to add the US monetary policy to the discussion: the decisions made by Janet Yellen, who has postponed the new interest rate hike, has helped the indexes to continue their growth, making government bonds less attractive and raising the investor’s appetite for the stock markets.
From a technical point of view the medium term trend remains weak, with prices still far from the peak reached in April 2015, over 12,000 points. Furthermore, if the Dax does go below the bottom of February (with the area placed at 8,700 which represents an important support) we could have a new bearish acceleration.
Conversely, we could have the first bullish signal if the prices can overcome the psychological area of 10,000 and the resistance located at 10,110 points. It is important to note that we can see in this area both a static resistance and a dynamic one, generated (1) from the previous peaks and (2) from a connection to previous significant peaks. Only in that instance could the DAX attempt a trickier climb to the next resistance levels, respectively placed at 10,400, 11,000 points and the more substantial 11,400 points.
Carlo Alberto De Casa
Carlo Alberto De Casa is Chief Analyst for the derivatives broker ActivTrades London.
He worked for Bloomberg in the City of London before joining in 2011 the Forex Broker ActivTrades, where he is specialized in Forex and Commodities markets. He has cooperated with “La Stampa” and other newspapers to publish in 2014 a book about gold (“I segreti per investire con l’oro” – Hoepli).
The thoughts and opinions expressed here are solely those of the writer and do not necessarily reflect the view of ActivTrades Plc. This commentary is for information purposes only and should not be considered investment advice. Any forecasts given are not a reliable indicator of future performance and the decision to act on any ideas and suggestions presented is at the sole discretion of the reader.