- The DAX tried to rally during the trading session on Wednesday but continues to struggle to hang on to the gain.
- Alternatively, this is a market that I think looks a bit tired, and now that we are above the €15,000 level, it seems as if the “oxygen is a bit thin” up here.
- If we were to turn around and break back down below the €15,000 level, it would probably bring in more selling pressure.
While that selling pressure could be rather rough, the reality is that the market is likely to continue seeing this overstretched condition as something that will probably have to be corrected. After all, there’s only so much momentum that you will see in the market at any given time, but I don’t necessarily want to start shorting the DAX. After all, the German index is the leader of the rest of the European Union, and therefore it’s worth paying close attention to not only what’s going on here, but also what’s going on around the rest of the European Union itself.
Market is Overextended
After all, there are a lot of concerns about the strength of the global economy, and of course the other peripheral countries around the EU now. As the ECB is going to be raising rates, it could weigh upon the strength of stocks overall, so therefore it’s likely that a pullback makes a certain amount of sense. However, if we continue to see people ignore central banks, then it will open up the possibility of the stock markets being taken off to the outside.
The 50-Day EMA sits just below the €14,400 level and rising, which could offer a little bit of a ceiling going forward. On the other hand, if we were to break above the top of the 2 shooting stars on the daily chart, that opens up the possibility of a breakout, perhaps reaching the €15,250 level, possibly even higher than that. Alternatively, the market is overextended so I think you need to see a bit of value to get involved and get aggressive in this market. If you are already long of the DAX, then it might be time to start thinking about taking profit, or at least moving your stop loss up in order to protect those profits if we do get some type of significant pullback.
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