Potential signal:
- I’m a buyer of the DAX if we pull back to the €22,700 level.
- I would have a stop loss at the €22,000 level, and a target of at least €23,200.
The German index has rallied slightly during the Monday session again, as we continue to see a lot of buying pressure in Europe. This makes a certain amount of sense, considering that the German economy is coming out of recession, and at the same time, we also have to keep an eye on whether or not interest rates in Germany could cause a bit of a problem. At this point, they haven’t yet but it is something worth paying close attention to.
The Trend
The trend has been very positive, and I don’t think that changes very easily. After all, momentum is a huge driver of where markets go. Short-term pullbacks continue to be buying opportunities from everything I can see, unless of course something changes quite drastically in Europe. While it could, I think right now it looks like everybody is still trying to throw money at the European Union after leaving the United States. Whether or not that changes anytime soon remains to be seen, but that is an argument for another day. If we were to break down below the €22,500 level, then you could see a significant drop.
On the other hand, if the market were to break above the €23,400 level, then we could see a big move to the upside. At that point, we will almost certainly see a resumption of the overall trend, and therefore, I think you will see even more money flowing into this market. However, between now and then, I’d be looking to buy short-term dips as they offer value. Remember, part of the goal of being a traitor is finding things that are cheap and taking advantage of the value. While I am very bullish of the DAX right now, I do not want to be a buyer at the very top. I’m waiting for that pullback in order to take advantage of what everybody else sees.
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