DAX Market Analysis, May 2021
April was fairly slow and quiet month for DAX after a very strong March. On April 16 and 19, DAX tried to enter into a new leg up but these were sold fast and DAX closed the month at +0.5%
April was fairly slow and quiet month for DAX after a very strong March. On April 16 and 19, DAX tried to enter into a new leg up but these were sold fast and DAX closed the month at +0.5%. It starts to look like bears are looking for market correction and as we write this (May 5) a small correction is ongoing; May 4 was the biggest negative day for 2021, fuelled by increasing interest rate remarks from US FED.
Looking at DAX monthly chart, trend is still as EMA6 stays above EMA12. DAX is still quite far away from EMA6 (big positive delta, as we mentioned last month) so it is very possible that DAX will seek to test EMA6 either now in May or in June. If May ends at current levels or lower, monthly candle pattern will start to look bearish as April candle formed a ‘shooting star’, often indicting change in market trend.
Long term levels of support: 14000, 13400
Long term levels of resistance: 15000, 15700
Weekly chart below with monthly pivot levels visible. In mid-April DAX started a correction - how big this will be remains to be seen. Middle term trend continues also up with EMA12 above EMA6 and DAX above EMA12.
Current upleg is quite a long one so likelihood for at least ‘medium’ correction (8-10%) is fairly high, as also mentioned in previous monthly analysis.
Medium term levels of resistance: 15400, 15700
Medium term levels of support: 14750, 14150
For a long swing trade, a possible good entry point would be EMA6 line from weekly chart as this has been holding nicely for a long time (EMA6 currently at 14762). For this trade there are several options on which instrument to use, depending on preferred risk level. One option could be:
There are multiple options also for short trade. In April, DAX moved a lot around 15300 which became a clear resistance. If DAX makes again to 15300, this could be a good point for short entry. E.g. one possible instrument:
Above: Investors’ sentiment in US remains very bullish with low volatility. This continues to be a possible contra indicator for market correction.
Above: Historically, May has been a neutral month for DAX
Above: McClellan oscillator signals increased risk and reason to be careful as we are below the zero line
Above: Split of stocks in DAX index that are above or below their respective DMA20 averages. Also here we see a red flag as net is below zero.
Above: Summary of technical indicators of stocks in DAX index. Long and mid term are indicating clear buy but short term trends are mixed.
Above: DAX historical weekly and daily changes
Above: World’s main futures continue in strong buy
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