5,600 points: The ultimate key brand!
With a view to the approaching end of the month, an analysis of the DAX® price index is again an option. A look at the German “blue chips” – without taking dividends into account – again tests the key level of 5,600 points that is regularly discussed at this point thanks to the positive August performance. At this level, the 38-month line (currently at 5,568 points) coincides with various old highs and lows as well as a Fibonacci level (5,644 points). Investors can see the relevance of the listed barriers from the fact that the price index has recently made three monthly highs in this orbit. In this context, it is interesting to take a look at the MACD, because the trend follower is working on a new entry signal on a monthly basis. If the break is successful, the German standard values should target the previous annual high of February at 6,137 points again. After that, the all-time high from early 2018 at 6,444 points defines the next resistance. In order to preserve the chance of a breakout, the equity barometer should no longer fall below the low of the end of July at 5,322 points.
DAX® price index (monthly)
Source: Refinitiv, tradesignal
Seasonal September dent?
In August, the international stock markets showed a very strong development. The Dow Jones® and DAX® gained 8.4% and 5.9% respectively, to name just two examples. This constructive development was facilitated by the two best-known cycles – the decade and the US presidential cycle. After all, both cycles went “hand in hand” and signaled that the American standard values both in the “0s year” and in the “election year” in midsummer could post price gains on average. Now, however, is time to rethink, because the seasonal tailwind described turns into the opposite. While the typical course of the “0s year” provides for a significant correction in September, the classic election rally even pauses from the beginning of September to the beginning of October. As the intersection of the two cycles, a likely challenging September remains to be noted. With a delay, the seasonally difficult phase in the 3rd quarter could still come to fruition. At least from a seasonal perspective, investors should be a little more cautious. The final phase of the election rally or the early phase of the year-end rally should not start until mid-October.
Dow Jones Industrial Average (Daily)
Source: Macrobond, HSBC
Outbreak to the power of three
With an upward gap ($ 267.43 to $ 271.62), Alibaba stock has recently made a triple breakout. On the one hand, there is a new record level (292.48 USD), on the other hand, thanks to this setting, the up trend that has existed since the beginning of 2019 (upper channel limit currently at USD 263.31) has been dynamic (see chart). In the end, this enabled the “bullish” dissolution of the sliding zone of the past few weeks. Six “inside weeks” have been trained since mid-July before the outbreak succeeded. The risk of a false breakout on the top is reduced by long signals from the MACD and the Aroon. We would also like to highlight the Kelly criterion, which combines trend-following elements with money management aspects. There is a bottoming out here. The uptrend is therefore absolutely intact and should bring further highs above the USD 300 mark in perspective. A close protection based on the newly created cross support from the above Gap and the upper channel limit ensure an attractive risk-reward ratio.
Alibaba Group ADS (Weekly)
Source: Refinitiv, tradesignal
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