DAX 30 Forecast:
DAX 30 Price Outlook: Index Probes Trendline Support Ahead of Next Week
The DAX 30 posted a strong gain for the month of April, returning just under 13% despite much of the developed world remaining under quarantine. As economic data deteriorates and joblessness rises, the DAX and other major equity players pressed higher. To be sure, there are causes for optimism as the number of coronavirus cases eases and central banks reaffirm their commitment to buoying their respective economies.
Still, I find it difficult to justify some of the rebounds witnessed and with a negative start to May, many analysts have questioned whether the decline will be more broad or if recent losses are just a speedbump as equities continue to melt higher. Also, the arrival of May brings with it the “Sell in May and Go Away” phenomenon, a seasonal effect which has coincided with poor stock returns in the month.
DAX 30 Price Chart: 4 – Hour Time Frame
That being said, the month of May does not always lead to stock losses and forecasting the trend of an entire month off just the first trading session is presumptuous to say the least. However, the technical levels at hand may be relevant regardless of gains or losses and could play a vital role in the larger direction of the index.
( 15:05 GMT )
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Weekly Stock Market Outlook
Thus, holding above the ascending trendline drawn from the April lows will be an early indication of how price action may unfold. Should it fail, further losses may become more likely and the German equity index could fall to Fibonacci support around 10,209.
On the other hand, a successful bounce off the level could allow bulls to regain their footing and provide a foundation for a run at the Fibonacci level overhead around 10,900. Secondary and tertiary resistance would likely reside in the form of the horizontal trendline around 11,025 and the April high at 11,340, respectively.
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of clients are net long. of clients are net short.
Finally, IG Client Sentiment data reveals retail traders remain slightly more long than short, but a closer inspection of the data reveals a serious decline in the number of short positions this week, which may suggest the DAX 30 is headed lower despite the relatively small difference in positioning. Since I find current valuations difficult to justify given the underlying fundamentals and the trendline looks to be at risk, I am left with a bearish bias headed into next week. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX