- Summary:
- The DAX index has formed a Doji reversal pattern. This suggests that the index will not test the 11,000 level any time soon. German reopening eyed.
The DAX index declined slightly as investors waited for an important meeting between Angela Merkel and heads of the country’s states. The index also declined in response to earnings from big American companies.
Angela Merkel, the German prime minister, will hold a meeting with heads of states to deliberate on how to reopen the economy. This follows a report by the National Academy of Sciences, who advised her to start a gradual reopening process starting with schools.
Germany has confirmed more than 132k coronavirus cases and more than 3,000 deaths. Still, recent numbers have been positive, with the number of daily cases falling significantly. At the same time, there are questions about whether reopening of the economy will lead to more cases.
The DAX index also declined because of the weak corporate earnings from the United States. Yesterday, earnings from JP Morgan and Wells Fargo showed that the banks’ earnings dropped by more than 60%. This drop was mostly because of the banks’ provisions of bad debt. As such, investors are concerned about the health of German banks like Deutsche Bank, which were already in trouble before the crisis.
The worst-performers in the DAX index today are Infineon, Adidas, SAP, Daimler, and Heidelbergcement while the best-performers are Merk, Wirecard, Linde, and Fresenious.
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DAX Index Technical Analysis
On the four-hour chart, the DAX index has moved above the 38.2% Fibonacci Retracement level and it appears as if it is struggling to get to the 50% level. The retracement was drawn by linking the highest and lowest points in March.
The index has also formed a small Doji pattern, which is a sign that the upward trend may not last. Therefore, I expect the index to move lower and possibly retest the 38.2% Fibonacci level at €10,375.
On the flipside, the Doji candlestick is relatively small, which means that the index may continue rising and test the 50% Fibonacci level of €11,000.