Trade of the week: short DAX 40

(Video transcript)

This week's trading opportunity

Axel Rudolph: Hello and welcome to this week's "Trade of the week" on Monday 28 April, 2025. Let's get straight into this "Trade of the week," and I would like to go short on the DAX 40 index. I know last week we went long, but let's talk about why we want to go short today.

Reasons for choosing this trading option

Basically, what we can see here is we've had a huge up move last week during the four days that we were open, and you can see here that we're starting to lose upside momentum. 

The candles become shorter. More interestingly, what we are also seeing is that we're hitting this previous support line, which is now this dashed line, acting as resistance. It capped the upside on Friday and seems to be doing so again today. So that, plus the fact that we're testing previous lows here, all this cluster of previous lows, leads me to believe that this is pretty important resistance.

We may well top out here. For that reason, I'd like to go short now.

The stop-loss for this trade would be probably not just above the early-April high here, because that might be slightly too close for this trade, but above the previous late-March high here, around 23,230 or so. The reason for that is also, if you look at the average true range (ATR) at the bottom of my chart, ATR, of the last ten days, that is around 500 points.

That means over the last ten days on average, the DAX 40, including any gaps, moved up and down by 500 points. If you take a stop-loss and place it two ATR away, twice the ATR, then that gives us a 1000 point stop-loss, which is approximately where we would be if we were to place it just above the late-March high.

So today's "Trade of the week" is to go short on the DAX 40 index with a stop-loss above the late-March high, and the downside target probably around the 20,000 mark.