DAX Index: Buy the Dip or Sell the Rip?

German stocks are in the red today, with the blue-chip DAX index falling by nearly 1%. The index is falling mostly because of uncertainty in the United States after Donald Trump tested positive for the virus.

InvestingCube's S&R Levels

NAS100

NAS100 (11325)

Not in Sell Zone

STOP

SELL

TP1

11182

TP2

11000

The DAX index is not the only benchmark in the red. Indeed, in Europe, the FTSE 100 and the pan-European Stoxx 50 has dropped by more than 0.80%. In the United States, futures tied to the Dow Jones and S&P 500 are also in the deep red.

The index is falling a day after ECB president, Christine Lagarde, said that the bank was considering taking similar steps to the Federal Reserve. By this, she meant that the bank was studying the implications of allowing the rate of inflation to rise above 2%. This would be a positive thing for the DAX index because it will mean that interest rates will remain low for longer.

However, the potential for uncertainty in the United States is a negative thing for the DAX index because most of the firms do a lot of business there.

Like with yesterday, Bayer is leading the losses in the DAX. The giant pharmaceutical giant is down by more than 2.60% as investors reacted to the current strategy. The firm cut its outlook for the year and announced that it will cut down in its agricultural business. This is a troubled business that started when the firm bought Monsanto in a $63 billion deal.

MTU Aero, Linde, Volkswagen, Daimler, and BMW are other top laggards in the index. Meanwhile, E.ON, RWE, Deutsche Boerse, and Deutsche Telekom are the best-performing stocks in the index.

DAX index technical outlook

The DAX index is trading at €12,650, which is a few points above the intraday low of €12,530. The daily chart shows that the index has been in the red for the past four consecutive days. The index has also fallen below the 25-day exponential moving average. Most importantly, it is between the resistance and support level of €13,340 and €12,185.

Therefore, I suspect that the index will end the day inside this channel. However, there is also a possibility that the index will erase some of these losses within the day as investors fade the downward trend.

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DAX technical chart

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