Charting and Triangle Trade Planning the Breakout In German DAX and EWG

The German DAX and related ETF EWG broke to new highs from a clear triangle pattern and we’re on “Trap or Breakout” watch as long as price remains where it is now.

Let’s update our chart and plan a few trading strategies based on the recent power-breakout:

The German DAX broke an Ascending Triangle pattern in September 2013 to see a strong, continued upward impulse that lasted throughout the rest of the year.

Price compressed and formed another compression or Ascending Triangle pattern into the 9,700 index level.

In May, buyers broke the index to new highs above the triangle to trigger a “breakout play.”  The DAX is thus bullish in potential breakout mode as long as we see the index remain above the breakout level near 9,700.

Note the pullback to test (touch) the upper trendine in October after the September breakout.

Any return back under the 9,700 and 9,600 level may trigger a Bull Trap and aggressive short-sale/reversal signal under 9,600.

We can take a closer look at the breakout and price levels as seen on the similar Germany ETF – EWG:

Though the price is slightly different, we can still see similarities in the triangle and breakout above the $32.00 level in the EWG fund.

A return under the upper trendline signals an aggressive short-sale/reversal set-up while a hold or sustained movement above $32.00 may lead to another continued upward pro-trend impulse.

A closer look at the intraday EWG gives us clear future-forecasting and trading parameters to watch:

I color-coded the intraday chart to highlight the key focal points and potential trade entry or management (stop-loss) levels.

As long as buyers hold the market above the $31.80 and $32.00 per share level, we could see short-sellers help fuel a ‘short-squeeze’ or sustained tradable breakout indefinitely higher.

Otherwise, a return under $31.80 is a “Caution” signal that may lead to an immediate retest of the rising $31.40 intraday key trendline.

A breakdown under the $31.40 and $31.30 level opens a potential breakdown and short-sale signal to target the $30.20 or even $30.00 per share ETF level.

Monitor the breakout and key trendlines and potential for a “Bull Trap” or “Breakout” impulsive play.

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).