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DAX September futures on a bullish breakout

The DAX 30 has been in a correction phase for over a year now. The global bull run started in early 2009, after the financial crisis of course, but for the DAX this ended in April 2015. Over the following 10-month period the index futures sank from 12429.50 to a low in February 2016 of 8690.50.

Note how we bottomed out only 175 points above the 12-year 38.2% Fibonacci support at 8517, as you can see in the monthly chart below.

From February the DAX managed a good recovery, in fact managing to recover almost exactly 50% of the total loss in the correction of 2015/2016 on the bounce to 10522. We only missed the 50% target by 38 points.

Since the peak of the bounce in April 2016 the market has been very dull, lacking any direction whatsoever. It took over two months to sink less than 1400 points to a low in June of 9153 but we have experienced a recovery since, albeit very slow. The daily chart below shows the action over the past nine months where we can see there has been no clear direction.

The US markets have left this index far behind as they hit new all-time high after new all-time high. However at last I believe we are seeing the potential for a quicker move higher… and a chance to play catch-up.

As I write we have been unable to beat the year’s high of 10522/523.5, set in January and April of this year. From the perspective of the daily chart this does not look interesting and the risks appear to be to the downside with failure likely at these highs. While this is always possible of course, I think the weekly chart holds the key to future direction.

Note how the index was unable to sustain a break above the 100-week moving average (the blue line) in the recovery from February to April of this year. Again this line was tested throughout June and held perfectly.

However, on this re-test at the beginning of August, I am expecting to see a bullish breakout. As I write we have managed to beat both the important 15-month downward-sloping trendline at 10340 and the 100-week moving average at 10390, as you can see in the weekly chart above. Yesterday for the first time we closed above both these important resistance areas, and the bullish breakaway gap on the daily chart from yesterday’s price action helps to confirm my bullish outlook. Now I need to see a weekly close above 10400 for further confirmation.

A break above the July high of 10472 would provide further confirmation this week, as of course would a further break above the 2016 high of 10522/10523.5. We would then look to target the gap at 10693. Once through here the index can charge on towards mid/late-December highs of 10833 and 10884/886.

Note however that a weekly close on Friday below 10300 would severely risk my bullish breakout idea and also risks a slide to support at 10110/10080.

Jason Sen
Technical Analyst & Trader

For more information, trading education and offers visit Intertrader

The content of this article is the personal opinion of the author and not Intertrader. The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest. Nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.

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