The DAX has been yo-yoing off both positive and negative news. In Friday’s trading session, equity markets continued lower regarding Greece’s debt issues. On Sunday, Greek finance minister Yanis Varoufakis has warned that if Greece leaves the eurozone, others could follow – see full article here .
The fear of a Greek default continues to dominate the markets, also weighing on market sentiment was news out of China. Late Friday, The China Securities Regulatory Commission said it would clamp down on trading activities. Namely on the use of leverage in margin trading and allow funds to lend to short sellers. This includes banning brokerages from using so-called umbrella trusts and the use of shadow financing, or unregulated accounts, for stock purchases. To put in a nutshell – restrictions on dealers borrowing cash to trade shares.
On the positive side for equity markets, as mentioned in last Monday’s article, China’s central bank (PBOC) has loosened its stance on monetary policy by cutting its reserve requirement ratio. The People’s Bank of China is staging its biggest cut to banks’ reserve requirement ratio in more than six years, releasing about $200 billion in liquidity for banks to lend – see full article here . This news has certainly bolstered all markets in trading this morning, with the DAX up 233 pips as I type.
Looking at the Hourly chart of the DAX below, one can see price found a floor in Friday’s trading at 11631. This came in just above the last recent low of 11622 and the Daily Pivot at 11612. This allowed bulls to step into the market with defined risk as the 11606 zone also lay below, a key zone to look out for in the week ahead, if the DAX rolls over again. In trading today, price has cleared through the 11750/11775 zone and in the last hour just cleared the 11840/11860 zone.
(click to enlarge)
CONCLUSION – NEUTRAL
On the Daily chart of the DAX, the trend is up. On the Hourly chart, the trend is down, with price being below its 200 moving average (green line in chart above). Bulls has stepped in with force this morning off the news of Chinese stimulus, however Greek concerns still linger in the background and are, as yet, unresolved.
For bulls, options are buying on strength, namely clearing the 11900 level. For the more risk averse, opportunities reside defining risk against the 11840/11860 zone, into the 11775 zone, and into the 100&200 MA’s (blue&green lines) on the 5 minute chart – see below.
For bears, opportunities reside shorting against the 11900 level, the 11927 price which is the 38.2% retracement of the move down from 12407-11631. Options are also against the 11860 on a drop below, although this maybe a harder course due to the potential of continued buying pressure when the U.S. markets open at 14:30 GMT, so stops should be very tight.
(click to enlarge)
Bearish targets :-
- 11795 (Resistance/Support level today – see 5min chart)
- 11775 (Key zone & also near Daily Pivot of 11771)
- 11672 (Daily low)
Bullish targets :-
- 11900
- 11927 (38.2% retracement & near key 11931 level)
- 12016 (Friday high)