Global equity markets have been rallying today, most noticeably in Asia. In Japan, the BOJ bought a total of 1.13 trillion yen of JGBs in its regular buying operation, a part of its massive monetary easing scheme. Japan’s Nikkei topped the psychological 20,000-point mark on Friday for the first time in 15 years.
In China, the Shanghai Composite rose 1.6% percent and broke back above 4,000 lifted by the talk of additional stimulus from Beijing as a result of subdued Chinese inflation. In Euorpe, Greece has repaid a loan tranche to the International Monetary Fund to keep alive its hopes of more aid. This collective bullish confidence has had the knock on effect and spilled over into other bourses, with the FTSE, CAC and DAX all rallying higher in trading today.
On Thursday, the DAX finally challenged it’s all time high, mentioned as a target in yesterday’s article at 12222 and backed off. Looking at the Hourly chart below, one can see that after the European open this morning, price eventually broke through this level and has not looked back.
(click to enlarge)
CONCLUSION – BULLISH
I am somewhat surprised the gap at 12006 did not fully fill over the last two days of trading as price was meandering sideways for sometime. However, it is important to note the German Index has at last broken the old high of 12222 set almost four weeks ago. What was once resistance now becomes support.
For bulls, price has moved 164 pips in trading so far today against an average of 203 pips over the last 22 days. One could argue the upside in trading is limited to a further 40 pips or so bringing it close to the psychological area of 12400. However, I wouldn’t be surprised to see it surpass that level today either. Over the past month, the DAX has had several 300+ pip days. Entry points at this stage would be into the current Fib zone (see 5 min chart below – move up as appropriate) currently at 12291 – 12252, with the 5 min 100 moving average (blue line) being a stronger level to lean against.
For bears, price is in no man’s land, drifting ever higher. Shorting opportunities with reduced risk really only reside at the 12400 level. Otherwise, price needs to get back below the old highs at 12222.
(click to enlarge)
Bearish targets :-
- 12300
- 12222 (Prior highs, now support)
- 12151 (Extension of daily range & close to Daily Pivot at 12158)
Bullish targets :-
- 12393 (Extension of daily range)
- 12400
- 12447 (Daily R3 Pivot)