DAX Market Analysis, November 2020

DAX Market Analysis, November 2020

17 November 2020Reading time: 3 minutes

Last week of October saw a nasty negative impact to the DAX technical picture when Covid-19 concerns on new shutdowns re-emerged in the headlines all over Europe.

Level 12 240 which has previously functioned as a support zone was easily broken and finally resulted in a -8% decline for the month. On monthly chart, exponential moving average 6 (EMA6) is still above EMA12 and thus the long term trend is still up. DAX did however close the month below both averages and this has historically (during last years) been a red flag and a warning sign. Needless to say, volatility has been high and VIX volatility index in USA tested 40 level (during the decline in the beginning of the year, VIX tested 80 levels).

One likely reason behind the significant rise in volatility is the US presidential elections. As we write this (November 3), the polling stations are open and voting is ongoing. On short term, a rise in the volatility is almost granted but volatility might decline fast after the election is over and the importance of who continues as the president is not that important for the markets. Both candidates have their strong and weak political sides, gallups and predictions are clearly rooting for Biden and this has not set the markets into a decline so far. Thus it is challenging to foresee that Biden as the next president is something that the markets would react bearish to.

Long term support levels : 11 300, 12 060
Long term resistance levels: 12 350, 13 200, 13 800

Below weekly chart with monthly pivot points plotted. Late October’s drop is best seen on this chart. Normally after such big weekly declines, more downside has been seen during next 1-3 weeks or at least the “bottom” has been tested a few times before continuing a bullish trend move. On the weekly chart EMA6 has crossed over EMA12 to the downside. This is an event that does not happen often and should be a red flag that the longer trend might be changing to a more bearish direction. The closest important support is found at October lows 11 400. If that level is broken, look for the levels around 11 000 which is also monthly Pivot Support 1. The first resistance level is found at the monthly Pivot Point 12 050 and at Pivot Resistance 1 which is found at 12 650.

Medium term resistance levels: 12 650, 13 000, 13 740

Medium term support levels: 11 400, 10 350

For long trades the situation is fairly easy - if your view on the market is that October lows will hold, enter long trade from intraday pullback and set target for previous highs. For this strategy, the stop order can be fairly tight at 11400 - 11500.

For the short trade, 12650 level is of importance. If we go above, it is more likely that the trend continues north.

Bull & Bear Certificates

 Symbol ISINIndex reference instrumentFactorTypeCur.BidAsk 
BULL AAPL X10 VNT3
DE000VE4KKK7 Apple Inc. 10.00 Long DKK 0.11 0.114
BULL AAPL X10 VNT4
DE000VE53624 Apple Inc. 10.00 Long DKK 0.02 0.024
BULL AAPL X10 VNT2
DE000VF8D9Y9 Apple Inc. 10.00 Long DKK 0.226 0.23
BULL AAPL X10 VNT6
DE000VP2SBE3 Apple Inc. 10.00 Long DKK 21.96 22.53
BULL AAPL X10 VNT7
DE000VP343E3 Apple Inc. 10.00 Long DKK 17.59 18.04
BULL AAPL X10 VNT9
DE000VP485T0 Apple Inc. 10.00 Long DKK 1.76 1.81
BULL AAPL X10 VNT8
DE000VP4VGN3 Apple Inc. 10.00 Long DKK 8.82 9.05
BULL AAPL X10 VNT10
DE000VP69NS9 Apple Inc. 10.00 Long DKK 0.882 0.906
BULL AAPL X10 VNT11
DE000VP9V6S3 Apple Inc. 10.00 Long DKK 87.74 89.99
BULL WTI X10 VNT8
DE000VP29RK1 WTI Light Sweet Crude Oil Future May 2021 10.00 Long DKK 76.65 77.35
BULL WTI X10 VNT9
DE000VP3A688 WTI Light Sweet Crude Oil Future May 2021 10.00 Long DKK 61.32 61.88
BULL WTI X10 VNT10
DE000VP3L891 WTI Light Sweet Crude Oil Future May 2021 10.00 Long DKK 6.13 6.19
BULL WTI X10 VNT11
DE000VP3TYV5 WTI Light Sweet Crude Oil Future May 2021 10.00 Long DKK 30.66 30.94
BULL OLIE X10 VNT9
DE000VP10DA2 Brent Crude Oil Future Jun 2021 10.00 Long DKK 0.012 -
BULL OLIE X10 VNT8
DE000VP1RE94 Brent Crude Oil Future Jun 2021 10.00 Long DKK 0.001 -
BULL OLIE X10 VNT11
DE000VP2QPN8 Brent Crude Oil Future Jun 2021 10.00 Long DKK 0.004 -
BULL OLIE X10 VNT12
DE000VP2SA70 Brent Crude Oil Future Jun 2021 10.00 Long DKK 0.066 0.07
BULL OLIE X10 VNT13
DE000VP3A662 Brent Crude Oil Future Jun 2021 10.00 Long DKK 242.56 244.62
BULL OLIE X10 VNT14
DE000VP3L883 Brent Crude Oil Future Jun 2021 10.00 Long DKK 94.92 95.75
BULL OLIE X10 VNT15
DE000VP4ETZ6 Brent Crude Oil Future Jun 2021 10.00 Long DKK 19.39 19.56

Investors’ sentiment in USA just turned bullish for the first time since biggest decline in summer.

November has historically been very strong for DAX.

Split of shares in DAX index into above and below each respective DMA20 average. The current situation is the lowest reading since the major decline at the beginning of the year. The probability for bigger swings upcoming 1-2 weeks is very likely.

McClellan oscillator is testing the -100 level which has been the last 6 months a great opportunity to enter a bullish trade for a mid to longer term trade.

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

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

 

Legal notice

This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

15/04/2021 12:39:18

 

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