Figure: Daily Chart for the DAX
The DAX continued its downward trend from Friday posing is an enormous concern for Bullish traders. The increase in negative reports from Germany has led investors to believe that the German economy has entered into a potential recession.
Low export numbers, on the back of weak Euro, is having a strong negative effect on the DAX. The slowdown of growth in China, which is the largest trade partner for Germany, paints a bleak picture for the German economy. Traders should be gearing up for German ZEW Economic Sentiment, which is a clear indicator about economic activity in the Germany. The CPI, which will be released by the ECB in the latter half of the week, will provide an insight as to whether or not the Eurozone economy is slipping into a period of deflation.
The DAX has breached below its main support level at 9143 and below the psychological support level of 9000. The index is currently trading below all daily moving averages. The momentum indicator for the DAX is pointing towards sell and the relative strength index has additionally indicated sell. The next support for the index is near the 8710 level.
Short the DAX at current levels for an intermediate target at 8710 with a strict stop loss at 9143
Long the DAX if it closes above 9143 for a short-term target at 9400 with a strict stop loss below 9000