Possible reverse for DAX ?

/ DAX is available for trading on Varchev Absolute Trader, MT4, MT5 platforms. The article is not a trade recommendation. /

Despite the end of QE in June 2022, the ECB has maintained its overall corporate bond holdings and still holds €389 billion of corporate bonds out of €1.12 trillion of eligible credit line. When the ECB launches QT in March, as announced, around half of the bonds bought will not be replaced.

This means the market needs to find an extra €1.5 billion a month from March if the ECB stops reinvesting half of the proceeds from the issues it buys, as a first step.
The news is not new, but it is very likely to raised yields on European bond issues at the same time as the ECB’s hawkish policy. The rise in borrowing costs, along with significantly higher than average levels for the past 20 years. inflation will push down the profit margins of European companies.

Future Market Dax

Futures contracts for the German stock index Dax are trading at slightly higher levels than the current price until the end of the year, with an upward trend.

Market Profile

The chart shows relatively low volumes in the Value area, which means that the price can move quickly without significant resistance in either direction. A more significant volume cluster is observed in the 14000 – 14500 zone, which means that upon reaching these values, the price will move hard and slowly and the zone is a potential support.

Technical Picture

Price action shows exhaustion of the up trend. Sequential e with a completed 12 up, indicating overheating of the last wave. Today’s opening with a gap below the diagonal support creates a prerequisite for a change in the current trend, a price crossing below 14900 will confirm the beginning of a downward correction. I expect the development of a correction with a potential first target in the zone 14000 – 145000.

Conclusion:

A close on a daily basis below 14900-15000 will confirm the start of a correction and on a return and retest of the channel breakout (around 15200-15250) the most aggressive traders can look for a reverse short entry signal with potential target in the zone 14000 – 14500. I want to note that this will be a position against the current trend.

Alternative scenario: A reversal and a close above the local resistance zone (15450 – 15600) will mean the potential development of a new bullish wave. The appropriate stop loss for shorts is above the resistance zone, measured against the size of the margin account.