Is Trouble in Store for the DAX?

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The DAX opened higher at the start of today’s session but has since then forfeited all of its gains and is currently trading well into the red. The DAX which has been in a strong uptrend over the last few weeks is showing its first sign of reversing. The energy stocks that caused the DAX to ascend at the open have relinquished almost all of their gains, which is causing the index to plummet.

Additionally, many analysts believe that the German economy is showing no signs of strengthening especially after the latest report regarding its manufacturing activity indicated a significant contraction. Furthermore, China is in the midst of its own slow-down and considering that Germany is one of its major trading partners, this can significantly hurt the German economy going forward. Investors should stay tuned for the upcoming European Central Bank meeting scheduled for 14:30 GMT on Thursday. Many leading experts firmly believe the ECB will keep rates at record lows and introduce its own version of Quantitative Easing, which should greatly benefit the equity markets.

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When looking at the hourly chart for the DAX, the index was unable to sustain itself above the 10000 psychological level and swiftly encountered extreme selling pressure. Its next support level DAX is at around 9897. Although they are still situated in the bullish zone, its momentum indicators, are starting to imply a reversal is imminent. Furthermore, its relative strength index is giving a clear sell signal, which is of course a bearish sign. However, it is imperative to state that the DAX is currently trading above its daily moving average.

Actionable Insight:

Short the DAX at current levels with an intermediate target at 9897, with a strict stop-loss above 10002.

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Deepak Tiwari, a law graduate, has been working as a journalist for six years now. He currently writes on Bitcoin, economic, and Forex related news at ForexMinute, the brand new financial news portal which is making waves among Forex traders around the globe for the innumerable Forex resources it offers for readers, traders and brokers. His other specialties include writing on law & governance, finance, internet marketing, careers, politics, international relations & diplomacy, etc.