Sunday, July 2, 2017

DAX Germany Daily Chart; Potential Island Reversal

Germany's DAX gapped up in late April and has been on an island above 12300-ish ever since. Price is now testing where the gap-up occurred. If price fails and gaps down to 12050-ish and lower in a heartbeat, that would be an island reversal chart pattern. Price may also choose to simply trend lower and fill the gap that is large enough to drive a truck through.

The red lines show the rising wedge pattern, overbot conditions and universal negative divergence across all indicators. Obviously, a spank down was on tap and the collapses from rising wedges can be quite dramatic. The smack down occurs and it was quite dramatic. Any fool that remained long in early June is not a chart technician.

The stochastics are oversold so a  bounce would be in order for price. The other indicators, however, are weak and bleak wanting to see lower lows in price after a bounce occurs. The RSI is not yet oversold and is in the neighborhood so the expectation is for a lower RSI which would correspond to further weakness in the DAX. The weekly chart displays negative divergence also calling for the spank down off the top which occurs. The weekly chart is open to further weakness going forward.

The expectation would be for a bounce for a day or two then likely a drop again where price will either decide to fill the gap below or perhaps print an island reversal as mentioned above. Keystone does not hold any positions on Germany. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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