Last Friday I wrote about the head-and-shoulders top in the DAX (ARCA:EWG) and how the target lower would measure to at least 7750. It broke the neckline lower before the ink was dry on the paper and headed south. And you can see Angela Merkel’s reaction. So rolling 4 trading days forward we see that the DAX is actually moving up? Huh?
This is actually quite normal and does not negate the pattern. In fact it would take a move over the right shoulder at 9891.20 to negate it. The retrenchment after a breakdown lower is a natural profit taking or short covering. Technicians trading the short side of this would love to see the DAX retouch the neckline and then reverse lower, strengthening the breakdown. It would re-enforce where to put the stop loss, and much lower than the 9891 level. Wednesday seems to be renewing the downward move. The close is more important than the mid day price though. Keep an eye on this bounce and be ready.
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