Bloomberg News

DAX Futures to Remain in a Range This Week: Technical Analysis

July 19, 2011

July 19 (Bloomberg) -- Germany’s DAX Index futures expiring in September may remain below 7,302 this week, as the contracts have “stabilized” in a range at that point, according to technical analysts at Commerzbank AG.

Since April, the futures contract on the benchmark gauge for German equities has been trading within a range between 7,015 and 7,650, a group of Frankfurt-based technical analysts led by Achim Matzke wrote in a report yesterday. A “summer rally” took the contract as high as 7,498 on July 7. It was at 7,127.50 as of 6:50 p.m. Frankfurt time yesterday.

The DAX Index’s September futures have fallen 5.5 percent from this year’s high on May 2 amid concern the European fiscal crisis will derail the economic recovery. The underlying gauge itself, which tracks 30 companies traded on the Frankfurt Stock Exchange, declined 5.6 percent over the same period.

“A continuation of the trading range should be on the agenda,” the strategists said in the report. “Trading should be determined on the one hand by the beginning of the earnings season in the U.S. and in Europe and, on the other hand, by news flow regarding possible solutions with a view to the indebtedness of the countries.”

European stocks sank to a seven-month low yesterday, extending the drop from this year’s high to almost 10 percent, after results from bank stress tests failed to allay concern that the region’s sovereign debt crisis is spreading.

U.S. Debt Limit

Concern American lawmakers will fail to reach a deal on the nation’s debt limit two weeks before a deadline has weighed on U.S. equities. A default by the U.S. would cause more panic than the collapse of Lehman Brothers Holdings Inc. in 2008, former Treasury Secretary Larry Summers told CNN in an interview broadcast yesterday.

DAX futures would probably decline further if the index breaches the current support zone of 7,015, but “at the moment, we lack indications that the future is going to leave the sideways movement with a sell signal,” Sophia Wurm, one of the technical analysts who wrote the report, said in a telephone interview. “We currently assume that the support zone of 7,015 will hold.” If it does decline further, the next support level would be around 6,830, Wurm said.

In technical analysis, investors and analysts study price graphs to predict changes in a security, commodity, currency or index.

--Editors: Joanna Ossinger, Andrew Rummer

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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