The Mood Has Shifted, DAX 30 Looks Ready to End the Downtrend

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The mood amongst investors has started to shift and could be looking at the start of a few days of gains in the DAX 30. From its weekly low of 7943, the DAX 30 had gained by 15.64% by the London morning.  Lower percentage growth of coronavirus cases in Italy boosted the mood, but so did the large fiscal and monetary stimulus packages by the Fed, ECB, and governments. However, probably the best indicator of the situation improving is the shutdown of California and its 40 million inhabitants.  The shutdown of what is the world’s fifth-largest economy is not easy and will hurt people and businesses. However, that is why stock markets have been trading aggressively lower in the last few weeks as they have been pricing in lockdowns and possibly recession.

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If we see the same development in the US as we have seen in Italy and China, then that should be the start of containing the spread. In China, the number of new coronavirus cases has almost been zero. In contrast, Italy before the containment that started on March 8 was seeing daily increases of about 26%, while in the last three days, the daily growth rate has, on average, been 14%.  Time will tell if the new measures will help the spread of the coronavirus, but I think it will, and from a technical point of view, we are seeing investors start to position themselves for a bounce.  The Nasdaq 100 has already dented the downtrend, and earlier today, the DAX 30 rose to the level of 9775. The same level blocked the DAX 30 to increase on March 17, and with today’s rejection, the price has formed a double top at that level.

If the DAX 30 is able to rise above the 9775 level, then short-term traders will probably target the next high, the March 13 high of 9999. A move above the 9775 level could also be the start of a larger move to the upside. However, a failure of the index to trade above 9775 could send the index back to an intraday low of 8228. The next days will therefore be critical for traders.

DAX 30: One-hour Chart
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The article was written by Alejandro Zambrano, Chief Market Strategist at ATFX UK. For more content, check out Investingcube.com.

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