There is a mixed bias across global stock markets today. From Asia, markets rallied off the back of news that China has cut it’s interest rates once again. This is the third time in six months as the People’s Bank of China (PBOC) cut both the benchmark one-year lending rate and one-year deposit rate by a quarter percentage-point each – see full article here.
Meanwhile in Europe, anxiety looms over the future of Greece as eurozone officials meet in Brussels today. Greece is due to pay the IMF another €750 Million by tomorrow. These concerns have dampened the bullish sentiment in the DAX and other European equity markets from earlier on in today’s session – see full article here.
Looking at the Hourly chart of the DAX below, one can see price is overextended from it’s Hourly 200 moving average (green line) after a strong rally on Friday. Price managed to clear and hold against the 11467/11457 zone on Friday eventually pushing higher to break through the Hourly 200 MA. This bullish move remained intact for the day as it went on to smash through the next big resistance zone of 11606/11595.
(click to enlarge)
CONCLUSION – NEUTRAL
The DAX has sold off in today’s session so far as investors wait to see what news comes out of Europe over Greek repayments.
The long-term trend is up. The intermediate-term trend is up. The short term trend is down. The price is certainly over-extended from its Hourly 200 MA, but to short this market today would only be the path for the seasoned trader – with precise stops in place. There is simply too much in the way of resistance on the downside for shorts from these current levels. First off we have the 11606/11595 zone, next 11514 (38.2% retracement from the low last week 11163 to Friday’s high of 11731), next the Hourly 200 MA, then the 11467/11457 zone which is close to the 11447 level – the 50% retracement in price and the Hourly 100 MA. Expect to see strong buying activity around these areas as bullish value investors continue to buy dips.
For bulls, strong buying zones with defined risk reside at 11606/11595 & 11467/11447. Other areas include the 11514 and Hourly 200 MA, although smaller stops could be used. For risk averse investors, price needs to move above the 11731 level, but ideally clear the 11776/11751 zone.
For bears, shorting opportunities reside against pullbacks into the 5 min 100 MA (blue line in chart below), the 11731 level or a break of 11632.
(click to enlarge)
Bearish targets :-
- 11606 (Key zone)
- 11514 (38.2% retracement – see above for details)
- 11468 (Extension of Daily range – 22 day avg. is 256 pips & into Key zone mentioned above)
Bullish targets :-
- 11751 (Key zone)
- 11842 (Key zone & Daily R1 Pivot)
- 11895 (Extension of Daily range)