DAX Analysis February 2015 (D,W)
Created on Sunday, 01 February 2015 06:47
Written by Austin Galt
The German stock index, the DAX, hit all time record highs during January so let’s take a look using the weekly and daily charts.
DAX WEEKLY CHART
There looks to be a 5 point broadening top in play denoted by the number 1, 2, 3, 4 and 5. We now await confirmation of the wave 5 high.
The Relative Strength Indicator (RSI) and Stochastic indicators are both in overbought territory so a correction now would be suitable. Both indicators are also showing a bearish divergence. I’d like to see price correct now and then turn back up and make new highs that are accompanied by triple bearish divergences.
The Moving Average Convergence Divergence (MACD) indicator is trending up bullishly but its averages have diverged greatly so a correction would help return them to normalcy.
The Bollinger Bands show price is back up to the upper band and looking strong. Any pullback now should be held by the middle band.
I have added Fibonacci retracement levels of the move up from October 2014 low to recent high. The uptrend appears to be in quite a strong position so I doubt any correction will break clearly below the 50% level which stands at 9582.
The Fibonacci level that really stands out to me is the 38.2% level at 9872. It is also conveniently around the middle Bollinger Band. Hmmm.
DAX DAILY CHART
The RSI is showing a bearish divergence and now looks headed down while the MACD indicator looks to be threatening a bearish crossover.
The Bollinger bands show price has moved away from the upper band and I expect price to come back to the lower band before the correction is finished.
I have added the same Fibonacci retracement levels from the weekly analysis. It shows the two scenarios I favour being a pullback to the 50% and 38.2% levels. I favour the latter.
Once the correction is over I expect a rally to new all time highs.