Dax Index DAX Topping Formation Short Set-Ups
If you trade Bitcoin you will be familiar with this pattern for sure.
Having broken below the longer term lower parallel the Dax has fallen away to structure lows to left of price, dropped a
little lower to take out the last swing long stops - and then promptly swung back higher again. In doing so it's tracking up
a smaller pair of parallels back towards the larger parallel above it. It is going to have an insumountable problem breaking
above either of the parallels now above it.
In addition to showing topping activity now we have a seasonal pull working in opposition to price. 'Sell in May and go away,
come back on St Leger day' is an old stock market adage for a reason.
Up to 2015, in the 65 years since 1950, the US stock market has returned just 0.3pc on average between May and October.
That compares with a 7.5pc average return from November to April. This significant difference is the justification for the
age-old adage. St Leger is the day in September when the horse race of that name is run. It is the traditional end of the
season, short-hand for being out of the market during the less profitable summer months and fully invested in the winter.
This pattern of seasonality is very much present but not apparent every single year. That would be too much to expect.
Nevertheless, it's very much there, even if it does hide sometimes inside the noise.
Long story short, this index is vulnerable again now. It's testing the junction between fixed and dynamic support lines
at 12789 now. Failure to hold here should tip it back into bear hands again and force it lower to 12599 to begin with where
it should try to bounce away again - any failure to do so will trigger another wave of selling back to 12323. Both these breaks
should be worth shorting when they come. Any break below any fixed line of support by more than 25 points should lead
to a near term test of the next support line. The biggest of these moves lower is the last, from 12300 down to 11856-11744.
On the upside this index has to hold up at 12789 now for the bulls to stay in control from here. It can do this one last time
and rally from here right back to the highs and just take the stops above out, before falling away again. This is effectively
inverse price action to the action we saw at the last swing lows of March. But that is a best case scenario.
At best this is a speculative buy at 12827 because the stop is so close by, just under 12800 for 30 or so loss if wrong here.
But be ready to short on first break below 12800 with stops 60 or more above.
The up-trend looks to be waning and running out of upside momentum now.
Be ready for the break lower, maybe set an alert, and act on it. It could be a good trade - if we don't get stopped out first...
If you trade Bitcoin you will be familiar with this pattern for sure.
Having broken below the longer term lower parallel the Dax has fallen away to structure lows to left of price, dropped a
little lower to take out the last swing long stops - and then promptly swung back higher again. In doing so it's tracking up
a smaller pair of parallels back towards the larger parallel above it. It is going to have an insumountable problem breaking
above either of the parallels now above it.
In addition to showing topping activity now we have a seasonal pull working in opposition to price. 'Sell in May and go away,
come back on St Leger day' is an old stock market adage for a reason.
Up to 2015, in the 65 years since 1950, the US stock market has returned just 0.3pc on average between May and October.
That compares with a 7.5pc average return from November to April. This significant difference is the justification for the
age-old adage. St Leger is the day in September when the horse race of that name is run. It is the traditional end of the
season, short-hand for being out of the market during the less profitable summer months and fully invested in the winter.
This pattern of seasonality is very much present but not apparent every single year. That would be too much to expect.
Nevertheless, it's very much there, even if it does hide sometimes inside the noise.
Long story short, this index is vulnerable again now. It's testing the junction between fixed and dynamic support lines
at 12789 now. Failure to hold here should tip it back into bear hands again and force it lower to 12599 to begin with where
it should try to bounce away again - any failure to do so will trigger another wave of selling back to 12323. Both these breaks
should be worth shorting when they come. Any break below any fixed line of support by more than 25 points should lead
to a near term test of the next support line. The biggest of these moves lower is the last, from 12300 down to 11856-11744.
On the upside this index has to hold up at 12789 now for the bulls to stay in control from here. It can do this one last time
and rally from here right back to the highs and just take the stops above out, before falling away again. This is effectively
inverse price action to the action we saw at the last swing lows of March. But that is a best case scenario.
At best this is a speculative buy at 12827 because the stop is so close by, just under 12800 for 30 or so loss if wrong here.
But be ready to short on first break below 12800 with stops 60 or more above.
The up-trend looks to be waning and running out of upside momentum now.
Be ready for the break lower, maybe set an alert, and act on it. It could be a good trade - if we don't get stopped out first...
Comment:
First short should have been closed out and ready to short again from higher up and to add again once 12599 breaks.