Written by 13:22 TRADING IDEA

TRADING IDEA – Short DAX – Stage set for a pullback   

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Trading idea – Short DAX – Stage set for a pullback   
After the strength seen across the markets in recent weeks, fueled by the Q3-reports and the German IFO-index at 84.3 beating consensus of 83.3, the German DAX index is now set for a pullback.  
There are a couple of fundamental threats on the horizon 
  • Stock market crash at high volume in China (down 35% only since summer)
  • Several fundamental risk elements upcoming –  FED FOMC (Nov 2nd), mid term election in the US (Nov 8th) and US inflation (Nov 10th), unlikely to tempt investors to add risk at present.  
The DAX index, now at 13,129, has crossed at the 61.8% retracement from high in August to low in late September and is now testing the falling trend line from January 2022.   
LEVELS: Target a pullback from 61.8% fib to 50% fib and September POC 
Primary target is a pullback to 50% fibonacci at 12,899 (a 280 point short). 
Secondary target is range between September POC (Point of Control) at 12,726 to 38% fibonacci retracement at 12,654 (a 400-475 point short). 
KEY RISKS: Stop at 13,370-13,492 range 
With regards to the falling trend line from the beginning of 2022, this is the fourth test of the trend line from below, which makes it likely not to hold. However, while we expect that the bottom for Q4’22 is in, a breakout above the falling trendline could be a false breakout before the next move.  
We set our Stop in the range between 13,370 and the 78.6% fibonnaci retracement level at 13,492. At that point we would need to consider price action and volume before deciding on our next step.        


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