Trade of the week: long DAX 40

(Partial video transcript)

This week's trading opportunity

This week's trade is to go along the DAX 40. We are looking at the German stock market, the DAX 40, which you can find on the platform as the Germany 40. We're going to go long this index on the basis that we are starting to see signs of recovery. Despite all the volatility we've had in gold and silver, and indeed in other markets, there are signs that the DAX has begun to recover from a price action perspective. If you look here, we have moved back above the 24,500 level, which is perhaps key because this was an area where we saw some support enter earlier in January, in the second half of January. And also, crucially, we've had a low form with support coming in around 24,300, which aligns nicely with what we saw in late December, and indeed going back into November as well. And this could suggest that the index is beginning to make a move higher.

Also, from a stochastic perspective, we have what's called positive divergence, where you can see the price made a lower low, as you can see here, the low from Monday 2nd February was lower than the 21st January, but the stochastic indicator made a higher low. And that is what they call positive divergence, and can mean that a new move higher is at play. Now, with this one, we could see this run higher for a little while, but our initial target would certainly be up towards 25,500, which would indeed be the record high from about two weeks ago.

So we are targeting long DAX at 25,500. And our stop we will put below today's low, below the 2nd February low, at 24,150, just a touch below that to give it some room. The possibility with this trade is that we have further volatility in oil markets, in gold and silver, and also that if you have, perhaps, a United States (US) attack on Iran, it could lead to a broader risk-off move in markets. So those are the risks, as well as the fact it is a very busy week for earnings and indeed for central bank decisions.

So there's enough to drive volatility in markets over the week, but, for the moment, the price action in the DAX remains relatively supportive. And that's why we've decided to go long the DAX from around current levels with our stop at 24,150 and our target at 25,500.

Previous week's trading outcome

In last week's "Trade of the week", Axel Rudolph looked at going long EUR/CHF on the platform, with his stop at CHF0.9160. Now, as you can see, this was last week, 26th January, with signs of a recovery in EUR/CHF. But that was swiftly knocked out by Tuesday's candle, which saw this very steep drop, for a forex market, as risk-off appetite began to take hold. And that took us right back to our stop-loss, and then it indeed continued lower.While it has recovered slightly, the fact that we have broken through these lows from October and November, does suggests that the longer term downtrend, which you can see here on the chart, certainly in action since 2018, if not earlier, has reasserted itself for the time being.

So last week's trade, not working out particularly well, but the stop loss hit as it was meant to do, taking us out of the trade before we suffered any larger losses.

Tune in next week and don't forget to like and subscribe.