Equity markets have been pummled hard in trading today with the Shanghai Composite falling 8.5%. This in turn had a knock-on effect as the European bourses opened this morning, with most equity markets falling over 1%. The possible reason behind the sharp sell off was weaker than expected data out of China last week amidst poor corporate earnings worldwide with concerns of a slowdown in global growth – read full article here
Looking at the Hourly chart of the DAX below, one can see the sharp selloff this morning. Price retested the 11328/11316 zone briefly before rolling over. It took out the downwards trend line, broke through 11200, eventually finding support at the 11174 zone. Price rallied to it’s 61.8% Fib level before rolling over once more.
(click to enlarge)
CONCLUSION – NEUTRAL
The market is massively oversold in my opinion. This market is still Bullish from a long-term perspective and that point of view will remain in place until the Daily 200 moving average is taken out, currently at 10826. For Bears entering the market – do so at your peril, as long term Bulls will be trawling for value swing plays at these reduced price points.
For Bulls, 11093 represents a value play as it’s the 61.8% price of the recent move higher from the July low 10653 to the July High 11805. Below that, we have 11058, the 61.8% retracement from the ECB announcing QE in late-January to the all-time highs posted in April. Below that the 11018/10986 zone comes into play. For the risk averse trader, a break above the Hourly 200 moving average is the safest play, which currently resides at the 11606/11595 zone.
For Bears, shorting a break below the 11093 level or retracements into the 100 & 200 MA’s on the 5 minute timeframe. Be wary though, as the downside maybe somewhat limited at these already suppressed levels.
Bearish targets :-
- 11072 (Extension of Daily range – 22 day average is 248 pips)
- 11018 (Key zone)
- 10932 (Daily S3 Pivot)
Bullish targets :-
- 11198 (Daily S1 Pivot + Key zone)
- 11316 (Key zone)
- 11372 (Daily Pivot)