Photo - Andreas Zanin
Andreas Zanin
Analysis | November 23, 2020

DAX30 & DOW JONES: weekly analysis 23-27 november

Market movers

The big rises of the last two weeks, after the news about the first potential anti-Covid vaccines, show signs of fatigue, especially when such movements are the result of speculation and short coverage, as we indicated last week.

Investors have cut positions as concerns about the economic damage inflicted by tightening restrictions on economic activity increase, while cases of COVID-19 continue to rise.

Friday was a technical deadline day, which could lead to a turnaround in the stock markets.

Those who bought Call options in the presence of the news about the vaccine or who had bought them to bet on a post-election rise in the U.S. will most likely find themselves in a long line of shares and will have to decide whether to sell them monetizing the gain or keep them confident in further rises. The first option is very likely, as operators’ attention has shifted to the negative effects of new lockdown measures imposed by countries around the world.

From next week it will be possible to have an idea at macro level of these restrictive measures: we will have GDP data for the third quarter of Germany, France and the US and especially IFO indicators on German companies’ sentiment in November together with the GFK , which measures German consumer sentiment.

We also remember the publication of the Fed and ECB minutes.

Analysis of the week and scenarios for DAX and Dow Jones

Although the indices have made the expected correction, the bullish trend remains robust as this week’s reversals have not knocked down any key support. Between ups and downs, a further acceleration in prices could begin, until the FED meeting on 16 December. We will monitor the market every week in order to understand the possibility of a new trend.

DE30 – For the whole week, the German index remained literally “caged” in the 13020-13289 range, with very few volumes and no clear indication of trend. On Monday, the price broke the 13230 resistance, going back too quickly and remaining within last week’s range.

This week we will focus on the 13250 level, looking for the break of 13289. If this happens, we have the possibility of touching area 13411-497, with extensions to the last resistance in February in area 13650-750. From here new historical highs, perhaps 14,000 points in a short time.

On the downside the Dax has very well marked the support in area 13020; a violent break in the area could offer us a strong correction up to 12723-635. It constitutes the weekly support zone; a heavy break of the 12,500 points would open the door to further falls.

Key supports at 12155-12237 and 11766, below which we should be ready for a trend change. Lost the 11542 the first targets are identifiable in the 11214-11095 zone; from here possible to extend up to 10766-10480, last touched on May 15.

US30 – On Monday the 16th, the Dow Jones conducted a test of last week’s highs in area 30098, but without knocking them down. From there it closed the week with continuous bearish pressure, creating a daily buying climax, a strong pattern of bearish reversal.

The 29619-29821 is the bullish range. A strong break opens the door to previous highs. The breaking of them contributes to last week’s 30715-31000 points scenario.

Follow very carefully the movements of Monday 22. 29164 maintained will indicate that buyers are entering to defend the bullish trend. If this movement is able to generate enough upward momentum, you could have a new test of the psychological level 30000. If, on the contrary, the 29164 level will be brought down, we will see a possible extension in area 28880.

The 28880-29119 are the weekly support to be monitored. Below it the intermediate support 28319-28051. A closure below 27762-625 would undermine the current bullish scenario.

Area 27019-26650 is the area not to be missed. This area has been successfully tested and has led to strong elevations. Sellers will return strongly if level 26110 is brought down. The drop will extend to the main low of July 30th at 25777. This is a potential trigger point for a new downward acceleration with three potential lower main targets at 25399, 25149 and 24680. Annual support particularly important at 24309.

IMPORTANT NOTE – Thanksgiving Day is perhaps the most important holiday of the year for Americans, so the possibility to continue one more week in trading range is very high. Friday’s technical deadlines may open to some volatility explosions; however, the high probability of low volumes recommends following strict monetary management rules and avoiding overtrading.

 

Research provided by Giancarlo Prisco

The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.

Before making any investment decisions, you should know that:

– Key to Markets publishes analysis of any kind solely for information purposes and should not be construed as investment advice or recommendation.

– Key to Markets will not be liable for any loss or damage arising from any such decision.

– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.

– Before making any investment decisions you should understand how leveraged products work as they are speculative in nature and may result profit and losses. Please, before starting to trade, you should make sure that you understand all the risks.

Latest Article
Improve your trading with a True ECN Broker
Trading account overview