DAX
Dax index struggles to advance, despite forming a bullish pattern. For more than four months now, it consolidates against horizontal resistance, putting pressure to break higher.
The secret of an ascending triangle is that the price will break higher eventually, but only with one condition. That is, the series of higher lows remains in place. The idea is that the market builds energy to pop. More precisely, buyers step in on every pullback, pressuring the horizontal resistance until it eventually breaks.
Naturally, the market needs a reason to pop higher. Considering that similar price action forms on the Dow Jones, for instance, the trigger may come from the U.S. elections.
Inflation ticks up a bit in Germany, in a positive development for monetary policy. While Germans are known for their inflation-averse reaction, stable inflation below the 2% is the ECB’s definition of price stability and is a positive for the Euro and the stock market.
Speaking of the Euro, the common currency trades with a bid tone so far into the trading week. All Euro pairs are up considerably – EURUSD, EURAUD, EURGB, EURJPY, to mention a few. The market is optimistic about the prospects of joint debt issuance and how SURE bonds were received by investors. Together with the uptick in the PPI, and subsequently, in the CPI, that might be just the good news the Dax index waited to pop higher.
An ascending triangle’s measured move equals the length of its longer segment. It means that bulls may want to project that length from the horizontal resistance. Next, go long by the time the market breaks the resistance. Finally, they may place a stop-loss order at the last higher low. More precisely, it means going long at 13,300 with a stop at 12,600 and a take profit at 14,800.
For more about technical analysis, consider our trading coaching program.
