What A Wick On The DAX – What Now?

The German DAX put in a huge wick above resistance. It was a one way street today, clearly rejecting price to the upside of the range. These levels are still in play tomorrow, will the weakness continue?

Hey, very good evening to you traders, hope you had a good weekend. DAX is where it’s at today. Look at that daily chart – what a wick to the upside. Okay, the levels to remind us; we’ve got that top line there which was the prior high, we’ve got the middle line there which was the little resistance level that we’d had back from June and the lower line becomes more obvious in the 15 minute chart. What’s been going on? Well, as we know, we’ve been butting up against that key 10 360 level, we had a couple a couple of decent trades off that and there’s been plenty of support down there at that 10 290 / 10 295 / 10 300 kind of range at the bottom of that range.

Now, what happened? Well, we gapped right up and we just sold off all day long. We had a little pullback down here but that was way after we tagged the low of support. We’d had a massive range, high early in the morning, 471, low 275, almost a 200 point range, that’s a big old range that we’ve had for a while and that really stands out to me. So it’s one of these charts that you just want to print out and frame because it’s so technical, it just did everything that the market should be doing. I always like to start with, when I look at the DAX specifically, or the FTSE, or even the DOW, I’m always more interested in the cash sessions. The cash session starts 8am UK time on the DAX and we just… it was such a nice chart to look at. Let me just bring in what we had at the open. We opened up, we pushed up, we pushed down and there was not a lot going on but the key things was, was that we were above that key resistance level. So when you see that you say to yourself, well what is going to happen now? Where are we going to go? How is the market going to accept being above here? 30 minutes in, 20 minutes in, it looked like we were about to push to highs, but again, these failure patterns are the ones that make you the most money. It’s not the patterns that are the text book patterns, it’s the ones that everyone piles in on and then gets caught out on at the very best.

So it rolls over and this time, Monday morning, there’s no rush to do anything, you just want to see what’s happening with the key levels. The likelihood is there’s going to be some trade today because we’ve gapped out of a multi-day range into fresh territory, and things are happening across the board. Something is going to happen today, there will be an opportunity, and that’s a very nice situation to be in on a Monday morning and there is some movement. You don’t need to rush into anything so just see what’s going to happen with everything.

We’ve pushed up, flagged down, and this is nice, pushed up, failed, but then you can see how key that level was because we just held that for ages. So you can say, yes, you know what, that’s a key level, I’m going to keep that level on my chart because the market is interested in it and participants are interested at that level.

Dipped lower, failed, pushed back up and then you get a double failure and it’s just these double failures that keep coming out of nowhere. And this is what I like about this sort of thing, this is the sort of things that I like to look out for and is one of my bread and butter type set ups; you have done all this work, up down, up down, up down, you’re pushing now to lows, here’s your new support level, you’ve broken through, it’s become resistance and you start flagging underneath it. That is the key to all of this – when the market holds above or below a key level, then it’s accepting the new price and the next likely move is in that direction. You see it time and time again, across a variety of markets. A bull market you see it breaking above resistance, it starts to consolidate above that and then the next likely move is accelerating out because price becomes accepted there, sellers have suddenly given up there. Buyers are happy to pay up what is considered to be quite a premium price.

So we get that, we flag lower, we push down, we push down, we push down, fill the gap, there’s the gap again, sitting by the gap it does another leg lower, tags that support level and to be honest, if you caught that short from way up there, then that’s fantastic trade and there’s no reason to be overstaying your welcome on that and I fully understand why everybody will have taken that trade out right at that lower support level because it’s the support level for multi days and you’ve already done almost a 200 tick move. So understandable. And then you see, this is where the difference comes compared to when you are holding below support, you’re chopping back and forth, back and forth, testing and retesting, retesting, we got to push back up to the close and we ended up closing actually, the cash close, 430 as if nothing had happened, it was completely almost unchanged in the day. We pushed down later, afterwards, so let’s see what happens. It’s a really, really, really week chart to have when you’ve got above highs and actually it’s upsetting the hourly chart quite a bit.

So let’s see. Big level for tomorrow running over my 5 minute time but let’s look at this. But big level tomorrow is definitely going to be at 10 300 / 10 290 and also right down to 10 275, we’ll be looking for a drive lower, a hold and then a subsequent short, but let’s see. DOW is obviously affecting this, let’s see where the DOW closes, if it doesn’t do much then we may get a bit of follow through, but the key level is going to be that support – will it hold or will it not? Let’s see tomorrow. Have a great evening, guys, take care.