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DAX: Black monthly candle warns of further price drops – UBS column

Review: The DAX is under strong pressure again and is in a brief downtrend after the index has largely trended sideways since June. This weakness shouldn’t come as a surprise when you look at the big picture with the monthly chart. A top formation was already emerging with the weak July monthly candle, which was confirmed with the likewise weak monthly candles from September and now also October. Something is brewing here that points to a long-term decline in prices in the DAX. In particular, the currently long black monthly candle for October also suggests further downward momentum in November. From a statistical point of view, falling prices can also be expected from a seasonal perspective until the beginning of December.

Outlook: The downward momentum in the DAX is increasing and this is unlikely to change much against the background of the escalating coronavirus crisis. Should there be another lockdown in Germany, the downward pressure on the DAX is likely to increase massively.

The short scenarios: The very weak previous day’s candle shows the situation in the DAX: opening via gap-down, breakthrough below the important 200 EMA and closing at the daily low with a black bearish daily candle. It hardly gets any weaker. The first approach mark should now be the lower trend channel limit in the range of 12,070 points. If a downside breakthrough is achieved here, the numerous lower gaps should be targeted. The first gap is at 11,391 points.

The long scenarios: The DAX can hold on to the lower limit of the falling trend channel and initiate another upward movement from here. If the 200 EMA is then successfully regained, the situation would brighten up somewhat and a price increase up to the upper trend channel limit at 12,800 points would be possible.

Disclaimer: The text is a column of the UBS. 4investors is not responsible for the content of the column and therefore does not necessarily have to agree with the opinion of the 4investors editorial team. Any liability and claims are therefore expressly excluded by 4investors!

At a glance – chart and news: DAX share index

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