Dear traders, dear stock market friends.
There is little new to report on the performance of Germany's leading index this year. Since the beginning of the year, the DAX has been moving in one direction as if on rails. New all-time highs are reached almost every week and the bullish momentum continues, which means that the index has been trading in the overbought range for several months. There are virtually no corrections worthy of the name. There are only short-term consolidation phases in which the DAX treads water for a few days before breaking out to the upside again.
Fed sticks to interest rate turnaround
Last week, developments in the US were once again one of the most important price drivers, including for the German stock market. The Fed signaled that it will stick to the interest rate turnaround in the current year and that three interest rate hikes are likely to follow from June. This is despite the recent publication of strong labor market and economic data as well as somewhat hotter inflation data. The dream scenario for investors therefore appears to be becoming a reality: strong economic growth, a fall in inflation and simultaneous interest rate cuts.
Weekly RSI at historic high
Following the positive news on Wednesday evening, the DAX rose to a new all-time high on Thursday, which was slightly exceeded again on Friday with a weekly closing price of 18,206 points.
A look at the weekly chart shows the extent of the current price rally. With a score of 78, the RSI(14) is at its highest level since 2015. The time for a correction would be long overdue anyway. In conjunction with the upper Bollinger band and the trend channel boundary line, at least the technical hurdles for an unchecked continuation of the rally appear to be getting a little higher.
DAX Index weekly chart
However, if you are not yet invested, you only have the option of waiting for a sustained correction or taking short-term trades in the direction of the upward trend. For long-term positions, the trend already seems to have run very far, so that the risk/reward ratio is no longer attractive. However, short positions are not advisable in this market environment, as the risk of being "overrun" by the trend is high.
Setups in individual DAX shares
In addition to trades or investments at index level, it is worth taking a closer look at the individual DAX shares and looking for trading setups. Here are some chart setups that are interesting for short-term trades as well as for medium to long-term entries or for short put and cash secured put strategies.
Adidas strong despite negative news
Adidas has been in the headlines in the last few days because the DFB will be equipped by Nike in future and no longer by Adidas. Adidas shareholders do not seem to be concerned by this, at least so far. The week before last, the share broke above the weekly EMA 200 for the first time since January 2022 amid high volumes and successfully defended it last week. The share is in an intact upward trend that promises further potential.
Solid upward trend at Beiersdorf
The Beiersdorf share is also in a solid upward trend. Should the overall market show weakness and the Beiersdorf share continue its correction, a promising support area would be located at around EUR 127.
Deutsche Bank on the brink of a turnaround?
The Deutsche Bank share is currently showing an interesting development. The weekly chart and the EMAs on the weekly chart are currently signaling an upward trend for the first time since 2008, with the EMAs 20, 50 and 200 rising and fanning out in the correct order. The share has also risen in the last two weeks amid high volumes and broken through a technical resistance level. Anyone who is still critical of a long-term investment can at least trade the trend in the event of a correction as long as it is intact.
Deutsche Bank weekly chart
Deutsche Bank daily chart
Author Tobias Schmid
Date: 25.03.2024
