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DAX: Long Setup Watch List

Weekly time frame:

  • The Dax has declined from the April high almost 13% reaching the 0.382 retracement of the rally from the October 2014 low
  • If the weekly Hammer candlestick is confirmed tomorrow, then odds should favour a countertrend rebound
  • The immediate hurdle is located at the 27 wma and horizontal resistance at 11165
  • Above the 27 wma there is white space until the 10 wma = 11482

DAX Weekly Chart
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Daily time frame:

  • It stands out that the decline from the April high could have unfolded a Leading Diagonal
  • If the Leading Diagonal is the correct pattern we would already know that for the time being the April high will remain a Top but it is common to Leading Diagonals a sharp countertrend rebound that could reach the 0.618 retracement. Hence we could establish as a potential target box for the assumed wave (B / 2) rebound the range 11603 (50 dma) - 11920 (first lower high)
  • Obviously there is plenty of overhead resistance. The first step needed is to close the gap at 11196.50 then reclaim the 20 dma = 11344

DAX Daily Chart
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  • Daily oscillators are displaying a positive divergence of both the RSI and the Stochastic (Positive sign). Going forward if the scenario of the Leading Diagonal is correct the RSI must breach its trend line resistance and reclaim the 50 line and the MACD has to trigger a bullish signal cross

DAX Daily Momentum Chart
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60 minute time frame:

  • There is a potential Double Bottom with a measured target at 11432.40
  • Obviously if the Double Bottom pans out the scenario of sharp rebound following the completed Leading Diagonal would be on the right track

DAX 60-Minute Chart
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Conclusion: The risk/reward is appealing. Lets see if tomorrow price gives an entry long opportunity.

 

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