Market Overview: DAX 40 Futures
DAX futures moved sideways last week with a pullback after potentially going always in short. Most traders will wait to see if there is a second leg they can participate in or wait for a buy signal low in a TR. Bulls will still get a MA Gap bar buy setup but it might only be for a scalp on this timeframe. Bears closed the gap so now sellers above which will limit the upside.
DAX 40 Futures
The Weekly DAX chart
- The DAX 40 futures last week was a pullback, a small inside bar after a strong bear leg down.
- It is an inside bar which is a weak signal in either direction.
- It is the 2nd consecutive bear bar, which is larger and the 2nd close below the MA. But the context is not great for a sell swing here.
- Most bears will wait for the bull pullback to fail and sell above or sell on the momentum if we break strongly below 2 weeks ago.
- The bulls see a tight channel and at least 3 legs up, so it was expected to go sideways.
- The bulls also see the expanding triangle, which often becomes continuation patterns in trends. So, there are likely buyers below.
- The week prior was a sell climax – it rapidly accelerated below the small bear channel. Bulls who bought there made money.
- Bulls that faded that bear doji made money – so limit order trading is another reason against taking short trend entries.
- Last week was a weak buy signal, so sellers above is more likely.
- Bears wanted a better close below – a BO and FT, but they didn’t get it. The risk now is if bears don’t sell strongly here, then a TR is more likely, and we will probably go back up.
- Bulls are concerned about the large gaps below as vacuums for price. So they will need to trade small and scale-in if it moves strongly down.
- We are probably always in short – even though the context for buying is still reasonable. Better to be short or flat.
- When you have good reasons to be short and long – it’s better to trade it as a TR and fade stop entries.
- Most traders should wait for a reasonable stop entry in either direction. Consecutive bear bars closing below the MA. Or a second entry long for a test of the high.
The Daily DAX chart
- The DAX 40 futures chart was a bull inside bar on Friday. So, likely buyers below and sellers above.
- If you extend a few trendlines across it looks like we need to go and test 15500.
- In comparison to the weekly chart – this is a bit more interesting!
- The bears see at least 2 legs down and might get a third. This would form a possible wedge reversal long setup.
- We broke strongly below the MA and git follow-through. This trapped-in bulls trying to scale in and created resistance above for bears to sell.
- It is an expanding triangle on this timeframe and we already got another LL. So it is 5 legs. Will we break below the low and get a move down? Or is this the test and reverse up?
- Thursday was a bearish outside bar, so likely sellers above.
- Look left – how many bull bars close above other bull bars? None? The bull bars don’t have good follow-through buying. This says to me we need to go lower.
- So if you do feel like getting long, it has to be at the lows and scaling in lower if at all.
- Bulls see a final flag, a TTR, and maybe this was the third leg. We tested the range, but they need a DB to get a good move back up. At the moment it looks more like a wedge that can fail and go lower.
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