Technical Analysis of DAX
Apart from a small number of ups and downs, for the biggest part of 2011 the DAX moved mainly sideways. If we look at Fig. 11.28(a), we see that the price in the middle of July 2011 was virtually the same as during the middle of January. It did drop to 6,408 on 16th March, but recovered after that. On 2nd May we saw a high of 7,601.50, but after that it dropped back into the Ichimoku cloud where it remained until the end of July.
The 1st August began like any other day, with no warning that this would be the start of a significant drop in the DAX. It opened at 7,241.80 and dropped to 6,801.30 before recovering somewhat and closing at 6,969.70, a level we have not seen since.
After that it was downhill all the way. On 12th September it briefly hit 4,963.80 before starting to recover somewhat. Since then we have seen a recovery to 6,430.80, which it briefly hit on 27th October, only to drop back into the Ichimoku cloud again. Traders who thought this was a breakout would thus have burned their fingers quite badly.
Right now the price is below the Ichimoku cloud again. The green Chinkou Span line has also dropped below the price of 26 periods ago, confirming the bear phase.
Before rushing into a medium-term short-trade, the cautious trader would however wait for the market to form a new low below the level of 4,963.80 we saw in September or at least for the Tenkan Sen (red) and Kijun Sen (blue) lines to also drop below the cloud. A long-trade would be rather optimistic under the current circumstances.