IFC Markets

Master Trader
Oct 31, 2012
1,725
9
84
London (Great Britain)
www.ifcmarkets.com
Negative data bearish for DE30

German manufacturing sector contraction accelerated in March. Will the DE30 continue declining?

Recent German economic data were negative: preliminary Markit Manufacturing PMI contracted from 47.6 in February to 44.7 in March, the worst level in six-and-a-half years. Analysts mention emission regulations and Brexit among negative factors weighing on German manufacturing prospects. Another major factor is concerns about slowing growth of China’s economy. China’s industrial profits dropped sharply in the first two months of the year - 14%, adding to data pointing to slowing of Chinese economy. Weak economic data are bearish for DE30.

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On the daily timeframe the DE30: D1 is retracing after climbing to 5-month high in mid-October. It is testing the 50-day moving average MA(50).

The Parabolic indicator gives a sell signal.
The Donchian channel indicates no trend: it is flat.
The MACD indicator gives a bearish signal: it is above the signal line and the gap is narrowing.
The RSI oscillator is rising after reentry from the oversold zone.

We believe the bearish momentum will continue after the price breaches below lower boundary of Donchian channel at 11270.79. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the last fractal high at 11823.24. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (11823.24) without reaching the order (11270.79), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary

Position Sell
Sell stop Below 11270.79
Stop loss Above 11823.24