Last Week’s GER30 Sell Down Makes For Awkward Weekly Chart

  • GER30

GER30 Big Weekly Drop

Last week the GER30, FXCM's proxy for the DAX30, dropped 6.4% from open to close. The coronavirus spread in Europe initially rattled the market. However, it was confirmation of a new strain that was the catalyst for the decline. First referred to as "Nu" but amended to "Omicron" by the WHO, research is currently being conducted on the new strain, with evidence suggesting a risk of increased infection. We note that information is currently limited.

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The sell-down resulted in a long ranged red candle (aqua arrow). The range of the candle is likely to prove problematic in the short term. It may (or may not) be a higher trough in formation. However, given the range, there is a good chance the candlesticks in the near term chart inside the range of last week's sell down. If so, this will make identifying if a higher trough is forming harder than usual. We would infer that price needs to close above last week's high (green horizontal) before the higher trough may be suggested. Please note that if the price drops below the red horizontal, this will result in a lower trough being charted which would be a bearish development. In this vein, the indicators have turned down. This is a concern. If the stochastic continues towards 20, and the RSI remains under 50, there would be a bearish momentum bias.

Monthly Chart

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The monthly chart is not outright bullish, however, there is a positive. With two days left of trade, this month's candle has charted a higher low and higher high (aqua ellipses). A close above last month's high (aqua horizontal), would have been more bullish and may have insinuated a swing low (aqua arrow). However, after last week's sell-down, this is now unlikely. Nevertheless, given the aqua ellipses, our attention now turn towards the weekly oscillators to monitor their trajectory.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.


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