Recently we have been writing about DAX and tried to turn your attention to a vital level to keep your eyes on. In case you have missed our article DAX Heavy, here is the gist of it: “DAX is breaking below the trend line that has been in place since late May. Watch the close today and if 12 400 holds or not”
Currently, DAX is near the next big support line at 12.200.
Similarly, in another of our texts, we have notified you about Head and Shoulders technical pattern seen in the DAX, and what we would like you to do now is take a closer look at D1 chart in the same index one more time. Previously we have reported that the Head and Shoulders pattern appears as one of the most reliable trend reversal patterns. The result was +3.20%.
We can notice “clear” same technical pattern, again.
Will this be the case, only the time will tell, but till then we can prepare ourselves for one more sell position.
Before we start with short technical analysis, let us point out an important tool you must use in trading – risk management.
As you can see, the price is on the neckline. From a TA point of view, if the price breaks out on this support line, at 12.200 area, a potential target can be seen at 11.820 ( yellow line).
RSI is in oversold level, therefore, some price pullback on upper levels is expected.
On top of that, the price is at a lower BB level, which can confirm our 12.200 support level. If you need more information on how to use support levels, feel free to read our text on Technical Analysis.
What can be your call here?
If you believe in the reliability of Head and Shoulders technical pattern, then you will see DAX is going south, sooner or later.
How big the potential profit could be, or whether we will see the price at a target of 11.820, it is hard to predict, and therefore, you must have and obey some trading rules.