(Source: IG Charts, created by Tyler Yell, CMT)
Typically, downside volatility is ‘triggered’ causing an abrupt change in how the asset is priced leading to an aggressive price decline. The price traveled in terms of time is much more aggressive and winning trades, if they are had at all, are often opened and closed in a much shorter period-of-time than a successful long trade.
Market: Germany 40
A key technical breakdown on the Germany 40 came when the price broke below the 2018 opening range low at 12,740. This is known as an opening range reversal, and such a development can be indicative of a wash out of institutions who establish positions early in the year closing out their long trades and flipping to a short campaign. As such, the bias will remain for further losses while the market trades below 12,740.
Currently, the price of the Germany 40 is being supported by the 38.2% Fibonacci Retracement of the 2016-2018 price range of 8,696-13,608 at 11,731. A breakdown below 11,731 would give rise to an opportunity to target a drop to the 50% retracement of the same range mentioned earlier at 11,152. The price rebound has been strong on the Germany 40 after the February 6 low. Traders should look for price to hold below the 38.2%-50% retracement on the rebound at 12,425-12,653 for bearish pressure to remain. A break and daily close above this zone would hurt the bearish technical case and would favor setting an entry order if price violently drops again as it did in early February for the short trader to ride lower with risk management applied.
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