DAX – Breakdown from Bearish Pattern at Risk of Failing

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What’s inside:

• DAX breaks rising wedge

• Potential for another bearish formation to develop outside of the wedge

• Needs to turn lower soon, else alternative paths will need to be considered

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The DAX broke down hard on Tuesday from the rising wedge we’ve been focusing on for the past couple of weeks; the break was the official trigger for such a pattern to kick off a momentous move lower. Or so it was supposed’ to be. At the moment, the market has other plans with yesterday’s 1%+ rise coming as a bit of a surprise. If the pattern is to still play out then additional strength from here should be limited, and very soon the market will turn around. But if it doesn’t, then of course we will need to consider alternate paths.

Another formation could come into view as a part of the rising wedge – ‘head-and-shoulders’. The break earlier in the week fleshed out a lower low from 3/8 and should we soon see a turn lower the right shoulder of the pattern could form. It’s just a thought at this time, but would fall in line with the rising wedge scenario still on the table. We still need that right shoulder and a break of the neckline before we can get excited.

Keep an eye on the CAC 40, as we made note of earlier this week it’s trading at a 16 ½ year trend-line.

DAX: Daily

DAX – Breakdown from Bearish Pattern at Risk of Failing

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---Written by Paul Robinson, Market Analyst

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