Bullish Dax

This week, we turn our attention to the German stock market index, the DAX. Since hitting its October low last year, the DAX has risen by 30%, showing impressive strength similar to other global indices. This upward move is particularly fascinating given Germany’s relatively weak economic environment. Despite the challenges, the DAX has managed a significant rally, which makes it an interesting subject of analysis.

Looking at a long-term chart since 2008, we can draw key insights from the monthly data. On this chart, each candle represents one month, and we see some very distinct trend lines, marked in purple on the chart. These trend lines connect the lows and highs of the market movements.

Notably, in March of this year, the DAX broke above these long-standing trend lines and moved sideways for several months just above the line. However, in August, the DAX experienced a sharp drop, followed by a rapid and strong recovery. This movement formed what is known as an “engulfing candle” — a bullish signal that indicates the current month’s trading range completely covers the previous month’s range, both on the downside and upside. Such a pattern is often considered a strong bullish signal in technical analysis, especially as it coincides with a test of the trend line that was previously broken. From a technical perspective, the DAX breaking out above the trend line and then successfully retesting it suggests a very bullish outlook. We will be closely monitoring the DAX in the coming months to see if this bullish pattern continues. If it does, we could see the DAX reaching the 20,000-point mark within the next few months. Given the current setup, this bullish scenario looks quite promising, even in the face of broader economic uncertainties.

The world of finance is complex and includes many technical terms. For explanations of these terms, I recommend using the Investopedia dictionary.