15 Sep Back To Trading With A DAX Long; 15th Sept 2013
After a refreshing 3 Week break from the Markets I’m now back and scanning through the charts of which some have surprised me, the strength in the Pound in particular.
Last Week I entered a DAX long for which I’ve only now got the opportunity to talk about. This trade is based on the Monthly chart and I’ve never before taken a trade on such a large time frame. Furthermore I had to stop myself being influenced by other Indices because none of them support the type of strength I’m seeing on the DAX even as far as to say my system is still short from May on the FTSE Daily chart.
As you may remember, the DAX Monthly chart has interested me for some time now so here’s a new snap shot of it to remind you of what’s attracted me to it. As you can see, we’ve had 4 Months of consolidation at the level of 2 previous all time highs and this Month’s candle so far looks to be the breakout candle (although that can still change before the Month is up):
The Daily chart shows where we are within the rally that commenced in the latter part of 2012. The warning sign here is that price is within a long term rising wedge which has the potential to end in a crash, or a deep correction that may take out my stop loss:
The 4 Hourly chart pin points an area that I had marked as potential resistance. Following a break-out price soon fell back to test that resistance as support and the market very quickly found buyers (including myself from 8471), however, after such a strong rally to get us to current levels I’d be surprised if we continue straight up from here (although that would be nice) as it would seem more likely that a period of consolidation with some dips may follow:
As mentioned above I’ve never previously taken a trade based more or less solely on the Monthly time frame and I’m a little nervous about how I’m going to manage the trade as the DAX certainly looks more bullish than other Indices and may get pulled back down as a result of general Market correlations. In view of this I’ve chosen to base my stop loss on a Monthly close below 8144 (the line shown in the Monthly chart) and the trade size is smaller than my usual size to limit potential losses.