DAX closes below its opening price unable to hold early session gains
DAX Performance-Index (DAX) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
Moving lower for the 4th day in a row, DAX finished the month 0.02% higher at 12313.36 after losing €66.29 (-0.54%) today. Today's close at 12313.36 marks the lowest recorded closing price since July 1st. Trading €121.65 higher after the open, the stock index was unable to hold its gains as the bears took control ending the day below its opening price. Closing within the prior day's range, prices missed to decisively move beyond the previous day's trading range.
Daily Candlestick Chart (DAX as at Jul 31, 2020):
Friday's trading range has been €211.39 (1.7%), that's slightly above the last trading month's daily average range of €182.65. Weekly volatility is also higher, being slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for DAX.
During the whole day, prices traded within the prior day's range, unable to trade above the previous day's high or below the prior day's low forming an Inside Bar. Additionally, one bearish candlestick pattern matches today's price action, the Bearish Closing Marubozu.
Prices are trading close to the key technical support level at 12189.67 (S1).
Crossing below the lower Bollinger Band for the first time since March 16th, prices have shown unusually strong downward momentum in the short-term. This could either indicate a potential selling climax after which prices might head back up towards the mean of the Bollinger Bands at 12782.24 or signal the beginning of a strong momentum breakout leading to even lower prices. The last time prices broke out below the lower Bollinger Band on March 16th, DAX actually gained 2.25% on the following trading day.
While the market is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
Selling might speed up should prices move below the close-by swing low at 12253.92 where further sell stops could get triggered. As prices are trading close to July's low at 12095.11, downside momentum might accelerate should the index mark new lows for the month.
Among the eight market conditions that our pattern recognition engine identified today, the statistics for the Technical Indicators based market condition "Close crossed below the lower Bollinger Band" stand out. Although it is usually interpreted as bearish, it has actually shown to be bullish for DAX. Out of 76 times, DAX closed higher 53.95% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 61.84% with an average market move of 0.68%.
With four out of the other five Major European Indices closing lower today, the ones that stand out on the negative side are BEL20 losing -2.01% and FTSE closing -1.54% lower. On the flipside the best performer has been TECDAX closing 0.42% higher. Read more