Trade of the Week: short DAX 40
We would like to short the DAX 40 with a stop-loss above the August high at 16,045 and a downside target of 15,500 or below for technical reasons and a weaker equity performance in the second half of September.
(Video Transcript)
We're still in for long Tullow Oil
Hello and welcome to Trade of the Week on Monday, 18 September 2023. A few weeks ago we went to long Tullow Oil and then unfortunately the company trimmed its output forecast and basically that led to the share price dropping by about 10%.
But, as you can see here, we didn't get stopped out. Our stop loss was below the last reaction low at 30.50p and this time around, basically what happened, we bounced off the long-term uptrend and also the red line here, the 200-day simple moving average (SMA), at 32.50p.
So we're still long Tullow Oil with regards to that trade. And what we can do is perhaps raise our stop price, if you wanted to, to the last reaction low, just below 30.50p or you can leave it where it is.
Reduce your risk with USD/JPY or cash in now
And then last week we went long USD/JPY and did so at around ¥147.35. So far you are in profit on this trade. So what you can do, if you want to, you raise your stop loss level to break even, thereby reducing your risk to about zero and just letting it run.
Or you can cash in your profits now or just let the position run as it is. So that's another one which is still open.
Short DAX 40 holds promise this season
Which brings me to this week's Trade of the week and it is to go short the DAX 40 contract. And the reason for this is that basically we are now in a timeframe, the last two weeks of September, where traditionally equity markets quite often have a negative phase and tend to have increased volatility and tend to decline into October.
And also, from a technical perspective, we've just failed again to break through the orange line near the 55-day simple moving average (SMA) and didn't last week manage to break above the late August high 16,044.
And as you can see, we had this tiny candlestick formation which we are falling through now today, which is telling me that perhaps we are heading back down again ahead of this week's Federal Open Market Committee (FOMC) meeting. The Bank of England (BoE) rate decision, also the Bank of Japan rate decision and inflation data coming out of the Euro Zone and the United Kingdom.
So, for all of these reasons, and also the technical reason here, I would like to go short the DAX 40 contract with a stop loss above the August high at 16,045 and a downside target of at least 15,500, maybe even lower.
So this week's Trade of the Week is to go short the DAX 40, ideally on a bounce back towards 15,845 with a stop loss at 16,045 and a downside target of around 15,500 or 15,400.
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