DAX 40 Bull Breakout Possible Double Top

Market Overview: DAX 40 Futures

DAX futures moved higher last week with a DAX 40 bull breakout possible above a wedge bottom so traders expect two legs sideways to up. The channel is so tight it is climactic, and might form a bull leg in a trading range. It is common in trading ranges for legs to go above swing highs and lows before reversing. The bears want last week to be a buy climax and look to sell a reversal down, although its likely to be minor.

DAX 40 Futures

The Weekly DAX chart

• The DAX 40 futures last week was a bull breakout bar closing near its high, so we might gap up on Monday.
• It is the largest bar late in a trend, so traders will likely take profits next week.
• The bulls see a breakout above a wedge bottom and expect follow-through or a pullback to a breakout test with the September 12^th high.
• It is a 6-bar bull micro channel, so traders expect the first reversal to be minor. They will also expect the first bar to go below the low of a prior bar to attract more buyers.
• It’s a big bull bar closing near its high so it is a buy signal, but traders should trade small and use a wide stop, look to scale in lower to increase probability.
• For the bulls, it is a spike, and they will be looking for a spike and channel. All traders will expect some kind of second leg, even if it is small / one bar.
• The bears see a broad bear channel, a lower low and a deep pullback but have not seen a break of a major lower high.
• They will look to short around the June 6^th high, betting that bulls will have to risk too much to create follow-through to break above.
• But the channel is tight enough so that it might form a bull leg in a trading range – this is reasonable because many months have been a trading range. A weak second entry sell might attract sellers.
• The bulls want a breakout test to remain above the moving average and the breakout point.
• The bears want a buy climax and a strong reversal down.
• The March 28^th high would be a stretch goal for the bulls and the underside of the previous trading range they broke out of.
• Most traders should be long or flat.

The Daily DAX chart

• The DAX 40 futures was a bull reversal bar, a doji on Friday, a pause bar, and a bull follow through bar after a breakout.
• It is a tight bull channel, a possible breakout above a wedge and a buy climax, where the price is sucked up to the highs where bears will sell.
• There were several gaps above the price last week, and we have closed many of them.
• We are also at two important measured move targets. Traders might expect profit-taking next week.
• For the bulls, it is always in long in a tight bull channel and with over 20 bars above the moving average, it is climactic, so likely to expect a pullback, perhaps two legs sideways to down soon.
• It is a bull reversal bar, so it is an ok sell signal. Better to sell below a bear bar closing on its lows.
• The channel is tight, so traders expect the first reversal to be minor. There are probably buyers not far below.
• The bulls want to close all the gaps above and get back into the trading range above – but that might be too far without a higher low.
• Look left, it is a trading range, so no matter how tight the channel looks, reversals and disappointment is common in a trading range. Traders should buy low, sell high and scalp (BLSHS.)
• Bears see a bull leg in a trading range and are waiting for a sell signal, or even better a second sell signal to go short.
• Most traders should be long or flat.

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