The main German index was up about 69% since March 2009 to December 2009. During this period it was able to keep an upwards tendency. As soon as prices touched that trend, quick upwards movements were brought about. This scenario indeed facilitated the proper strategy: according to Technical Analysis basic principles, a trader must be coherent with a trend direction. Therefore, long positions should have been kept for the last three quarters of 2009. However, by the beginning of the second fortnight of January 2010, the situation changed dramatically. That tendency, which had played a key role, was broken and therefore, it didn't make sense to maintain the same strategy.It was difficult to evaluate the consequences of such a tendency break, especially because the volume was significantly higher than the monthly average. From that moment, perhaps the indicator which has taken the lead in the new scenario has been the 200-session moving average. This indicator has allowed the Dax to build the foundations of its recovery. In the short term, it´s developing an inverse shoulder-head-shoulder. The most important element is the neckline that the level of 5.735 represents. If prices pierce it with an important volume increase, the next goal would be the high levels of 2010, that´s 6.100, which implies a recovery of 6.30%.
From a Technical point of view, we recommend to open long position above 5.750 and a stop loss on 5.480.
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