One of the most widely used strategies among traders is “trend following”. The idea is to buy an asset when an uptrend is formed, and sell when a downtrend appears, on expectations that the momentum may continue. The Germany 30 stock index has been under pressure through the second half of 2018. The decline began from roughly 13,000 to now sit below 11,000. Taking a closer look at the index from the perspective of technical analysis, a potential trend following opportunity may be present.
On a weekly chart, a downtrend can be spotted with several key support and resistance levels. Last week, a strong down candle was formed, breaking out of the consolidation phase and breaching the support level at 11,000. Stepping into this week, an up candle appeared with a retracement of the failed attempt to pass 11,000. A rejection of this key psychological level together with a ramp-up of selling momentum signalled by the MACD (12,9,25) could mean further downward movement towards 10,500. If the selling pressure persists, the next level to watch could be at 10,000.