DAX Market Analysis, December 2020

DAX Market Analysis, December 2020

08 December 2020Reading time: 3 minutes

DAX advanced 14% during November and thus the decline during October was gained back. We are again close to the 13500 level which has been a significant resistance now for a longer period already.

In November we had several positive news hitting the market: the election in the USA will most likely see a smooth transition after all without the need of going through the court. Also positive news regarding several vaccines showing good protection against COVID-19 that could start rolling out as early as the beginning of 2021 helped indices rally during November. These positive news are likely to some degree already to be discounted in stock prices and only time can tell if there is still room for further gains or do we continue to trade in a bigger range.

The long term trend is however bullish measured with moving averages EMA6 and EMA12, where DAX is above both moving averages which are also pointing north. On top of that, the monthly candlestick for November is bullish and December has historically been a bullish month.

Long term support levels 11500, 12350
Long term resistance levels: 13500, 13800, 14000

Below weekly chart with monthly pivot points plotted. The last 3 weeks of trading had lesser volatility/swings than the 3 previous weeks before that. After the strong advance during November, DAX is likely to consolidate before the next price movement. As long as we are above the monthly pivot point (12760), it is more likely that the next price movement reflects further gains towards the 14000 levels. Unless there are no major news hitting the markets during December, the most likely scenario is that DAX will continue trading in a range with modest volatility for the last trading days of 2020.

Medium term resistance levels: 13380, 13900
Medium term support levels: 12480, 12780

For long trades the situation is complex - the probabilities favour a bullish December but the strong advance during November could contribute to consolidation or a larger pullback in December, thus the knock-out risk is significant. The 13000 level provided support during November and also the 50 day moving average on the daily chart (12820) is a level to follow and it is good to be prepared that these levels could be tested in the near term future.

For the short trade, it seems likely that we test first 13500 as previously before a correction.

Investors’ sentiment in USA is still bullish and at such levels where this could possibly turn into a contraindication and set off a market pullback. However since December has historically been bullish, the probability seems small for a significant decline in the last trading weeks.

December has historically been very strong for DAX.

McClellan oscillator is currently in neutral territory and pointing south. This is a red flag, the current bullish trend is not strong.

Summary of technical indicators for shares in DAX index. Shares are mostly in strong buy mode.

Above: Historical average price movements on a weekly and daily basis.

Major world futures: indicators for futures are also mostly in strong buy mode.

 

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15/04/2021 14:05:04

 

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