DAX 40 Wedge Bottom and Tight Trading Range

Market Overview: DAX 40 Futures

DAX futures was a DAX 40 wedge bottom and a tight trading range, low in a large trading range. it could be a double bottom buy setup, but bearish enough for a second leg down next week. Bulls are looking to swing for a break higher and measured move up. Bears hoping they can break down and make the wedge fail for a larger continuation down

DAX 40 Futures

The Weekly DAX chart

• The DAX 40 futures was a bear bar closing near its lows on the weekly chart and had a large tail above.
• The bulls see a possible wedge bottom, three pushes down with March and July and are looking for a reversal. It’s a micro double bottom buy setup, but it’s a bear bar.
• The bears see a broad bear channel, lower lows and 3 consecutive bear bars so expected a second leg. We may have just finished the 2^nd leg.
• The bulls really want a major trend reversal, first a lower low and then a higher low and 2 legs up, possibly the range of the wedge.
• They see this week as a pullback and breakout test of last week and want another move.
• But they have failed to get consecutive closes above the moving average for many months.
• The bears have been selling the moving average all year and will continue to do so until it is no longer profitable.
• The bears want a breakdown of the wedge bottom and measured move down, which would be in the area of the previous harmonic retracement. But it’s a long distance away and bulls are buying new lows.
• Limit order bulls are making money which means the trend is not as strong as it could be. In fact, we have been in a range since March.
• The bulls were able to get 4 consecutive bull bars in July, so it’s not as bearish as it could be. If the bulls can get a pair of consecutive bull bars, one closing above the moving average, it could be a rapid push higher as bears cover shorts.
• It’s a decent bear bar so it’s a sell signal for next week, but it failed to get below the low of the prior bull breakout bar so it’s a pullback and possible buyers below.
• Bears will likely need a follow-through bar to convince traders to swing lower.

The Daily DAX chart

• The DAX 40 futures was a bear bar closing near its low on Friday.
• It’s the 4^th consecutive bear bar, so it’s a micro channel. 3 of the bars are big and closing on or near their lows, so the momentum should have another leg down.
• It’s a bear bar, so sell signal for Monday, but also a reasonable place for profit taking, so bears might sell the first High 1.
• The bulls see a pullback from Sept 5^th, a breakout test from a higher low possible major trend reversal. Bears have sold strongly in this area but were not able to break the March – July lows.
• The bulls will buy the triple bottom hoping for two legs breaking above the bear trend line and for a move higher.
• Currently, the bears have sold every test of the channel line.
• The bears see always in short, reversing down from above the moving average. It’s a higher low and a lower high so it’s a triangle and tight trading range, so it’s breakout mode.
• The probability is about 50/50. Even with a break below, low in a trading range is a reasonable place to buy a second entry for a move up to the top of the range.
• But the same applies above, once we move above September’s prices, the math favors selling again, that is what happened last week.
• It’s a possible double bottom with Sept 5^th, but who wants to buy 4 bear bars? More likely we move sideways to down next week and see how many buyers are below.

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