The DAX index is crawling back after it dropped to the lowest level since December 1st on Monday. The index is trading at €15,400 in the futures market. This price is slightly above Monday’s low of €15,000. Other global indices like the Dow Jones and FTSE 100 have also rebounded as investors buy the dips.
The DAX index declined sharply on Monday as investors remained concerned about the Omicron variant and the measures by the German government to slow the spread. The government has announced measures to limit the spread of the virus. For example, all UK visitors will need to test negative for the virus and then stay in quarantine for a few days. It is also encouraging more people to stay at home.
Analysts expect that these measures will lead to more weakness of the German economy. Most importantly, companies like automobiles that are some of the biggest employers are expected to face more supply disruptions. Indeed, companies like Porsche, Continental, and Daimler were among the worst performers in the DAX on Monday. The only DAX constituents that were in the green on Monday were Hello Fresh, Merck, Qiagen, E.On, and Siemens Healthineers.
The daily chart shows that the German DAX formed a hammer pattern on Monday. In technical analysis, this pattern is usually a bullish sign. The index is also slightly above the important support level at €14,983, where it struggled moving below several times this month. The index is slightly below the 25-day and 50-day moving averages. It has also formed a broadening pattern, which is usually a bullish sign.
Therefore, the index will likely break out higher in the coming weeks. If this happens, the next key level to watch will be at €16,000. This view will be invalidated if it moves below the important support at €14,983.
This post was last modified on Dec 21, 2021, 07:11 GMT 07:11