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You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Can an inverted hammer candle on the DAX signal a recovery?

DAX Xetra (cash index)

It is a difficult time to trade equities and the DAX is no different as volatility has pulled strongly higher in the past couple of weeks.

After the recent sell-off, there was a false start to a potential recovery yesterday which will leave traders a touch more wary today.

Is the early rebound anything more than a dead cat bounce?

Yesterday’s candle was an imperfect “inverted hammer” which could now signal a recovery, but it depends upon today’s session.

The candle shows an intraday rally that failed and subsequently closed towards the day lows.

However if today’s session remains positive then it would signal the bulls regaining confidence again, which would validate the rebound as a viable reversal.

The open higher today has slipped back and there is currently a negative candle on the daily chart, so we need to be cautious still with the potential for a recovery.

  • The fact that this is all playing out under the significant overhead supply of 11,726/11,865 should also suggest caution.
  • Despite this though, on the hourly chart there is a potential small base pattern which would form on a decisive move above 11,700.

The hourly RSI above 50 would help improve the outlook also, but needs above 60 to really suggest momentum improving strongly.

For now this is a rebound very much being questioned by the market and with hurdles to overcome.

But at least the panic selling seems to have dissipated this morning, which is a start.

 

Richard Perry

Richard Perry

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