It's remarkable how many share market index charts are currently showing very similar patterns. This suggests the major drivers of investor behaviour are global, not local. Given a smorgasbord of trading choices, traders may be attracted to the precisely defined range of the Germany 30 index, tracking the DAX.
Many global indices reached the top of recent ranges this week, then failed. While this is concerning to investors, it's more useful to traders, especially where the failure occurred near recent highs. This further definition of the trading range gives traders two "lines in the sand" to work from:
This chart may be interpreted as a sideways range, bounded by 9,310 and 10,360. This 10% range has the potential for significant profit opportunities.
Of course, there is always potential for the index to break the range. At current levels, the forward Price/Earnings ratio is around 13.2 x, compared to the 2015 average above 14 x. The dividend yield is just below 3% - potentially attractive in a zero interest rate environment.
These fundamental factors mean risk management (stop loss order!) is even more important than usual to traders looking at shorting. The trigger for a new up or down trend is not obvious at the moment, but surprise announcement of an increase in the ECB's stimulus program tonight could be an important market event.