back
Details Cookies
Hong Kong S.A.R
Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

background image background image background image

Lower levels likely for German equities

Equities 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary:  An SHS pattern that began to emerge in the DAX in early September is now coming into much sharper focus. What's more, several technical indicators suggest that things could get worse from here.


Some weeks ago it became apparent that an S-H-S pattern in the DAX seemed to be unfolding:

Medium term, next couple of months, weekly chart – as of 11.09.2018:

Taking a closer look at the weekly chart an interesting scenario could unfold. Not only has the DAX broken bearishly out of a triangle-like pattern but the index is close to confirming a Shoulder-Head-Shoulder (SHS) pattern – not a straightforward SHS as it has two heads but nonetheless an SHS pattern. (The head was actually a double top which was concluded in Q1 2018 when dipping below 12.000). Another little caveat is that the neckline is sloping downwards. An SHS pattern with a downwards sloping neckline usually performs worse than an upwards sloping neckline, i.e. if breaking the neckline the drop could be of less magnitude – it has already moved most of the way AND if dropping down to test the neckline the 200-week moving average will act as a support which could be around the 11.500 level. 

Update as of 11.10.2018:

That’s more or less where we are now. As can be seen from the weekly chart there is not much strong support before around 10.800. So it can get much worse. The 10.800 would be the minimum target for the S-H-S formation. 

However, in the short term we could see some rebound. It is not unusual to see pullbacks where the market retests the neckline from beneath before the next likely sell-off.  RSI and MACD are bearish with no divergence so all indicators are pointing lower. Bollinger® bands are expanding, indicating the initial stage of a (medium-term bearish) trend.

Weekly – DAX. Source: Saxo Bank

Daily – GER30 

In the short term we could see a rebound and at the time of writing, GER30 is rebounding somewhat from the falling neckline. However, I do not believe the rebound will turn in to a bullish trend any time soon but a rebound towards the resistance at around 11.865 could be seen over the next few days. 11.700 also offer some resistance. 

Bollinger® bands are expanding indicating we are in the initial stage of a trend pointing to lower levels. RSI has been indicating a bear trend since July as it has not been able to break above the 60 threshold and GER30 has indeed been in a bear trend since with lower highs and lower lows. 

RSI is not showing divergence so lower levels on DAX/GER30 are on the cards.

Daily – GER30. Source: Saxo Bank
Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.