DAX® price index – gathering strength before further upward movement?


HSBC Daily Trading

Gathering strength before further upward movement?

After the 2,300-point rally since mid-May, the DAX® took a well-deserved breather yesterday. Why are the German standard values ​​pausing now? The DAX® price index should play a major role in this context. Without taking the dividends into account, the stock barometer approaches the striking resistance zone at around 5,600 points. At this level, the price index has repeatedly made important highs and lows in the past. In combination with the 200-week line (currently at 5,588 points) and a Fibonacci cluster consisting of two different retracements (5,454 / 5,644 points), a textbook-like accumulation resistance arises here. Against the backdrop of the dynamic rally of the past few weeks, it shouldn’t come as a surprise to investors if the German standard values ​​are unable to jump over the hurdles mentioned on the first attempt. In the course of a healthy respite, the most recent upward gap on a weekly and monthly basis (5,192 / 85 points) marks an important area of ​​retreat. After all, price gaps in such high time levels are extremely rare. Then it should go north again, because the recent “V reversal” results in a target price of around 6,100 points (see chart).


DAX® price index (weekly)

Chart DAX® price index

“Failing top formation” as a course driver

One of the core demands of the Dow theory is that the indices – i.e. Dow Jones® and Dow Jones Transportation® – should be mutually confirming. Traders derive important guidance from this. This says that the Dow Jones Industrial Average® goes where the Dow Jones Transportation is developing. In this context, an important course has recently been set for the transport titles, because recapturing the lows at 8,700 negates the previous triple stop. In the past, such a “failing price pattern” was often a good breeding ground for corresponding follow-up gains. In this context, a special exclamation mark is that the sketched exemption was carried out with an upward gap (8,595 to 8,686 points). On balance, the transport index signals relaxation. The lows at around 9,700 points in combination with the 38-week line (currently at 9,770 points) mark an important start-up target. With a view to the Dow Jones Transportation®, investors should even ask themselves whether this is the price trend that anticipates an economic recovery.


Dow Jones Transportation Index (Weekly)

Chart Dow Jones Transportation Index

Before new record highs?

The February / March correction has now fully caught up with the United Health share. In addition to this evidence of strength, investors can currently identify a number of promising technical chart phenomena. The first steep template is provided by one of our newer trading approaches. This combines a constructive relative strength (Levy) with trend following and money management aspects of the Kelly factor. Both factors are currently signaling the green light. In the course of the relative strength there is even a V-shaped reversal pattern. This aspect deserves a special mention because the indicator formation described may anticipate the equivalent course setting in the actual course of the chart (see chart). In this context, a spurt above the $ 310 mark that the stock has been struggling with for six months would provide a double entry signal: on the one hand, through a new all-time high, and on the other hand, the described V-formation would have been broken up. From the depth of the cut in the meantime, there is even a long-term connection potential of almost USD 120. In the event of an outbreak, the 2018 high at $ 287.94 is a close-knit hedge.


UnitedHealth Group (Weekly)

Chart UnitedHealth Group

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