Great Britain wants to improve Brexit conditions
British Prime Minister Theresa May announced about the early parliamentary election. All European stock indices dropped, while the British FTSE 100 slumped by 2.5%. Let us consider the probability of the further decline in the German DAX index.
The early parliamentary election in Great Britain will take place on June 8, 2017. A number of parties, like the Scottish National party, Labour Party and Liberal Democrats are against the Great Britain’s exit from the European Union. The Conservative Party and its leader Theresa May are for Brexit. In her opinion, the new election will allow to increase the presence of Conservatives in the British parliament. This may contribute to getting more attractive conditions for the country’s exit from the EU. We do not exclude, that if Great Britain actually manages to agree upon the preferences during Brexit, the economy of other EU countries may suffer from this. Maybe, this will push the DAX prices down. On Wednesday, at 11-00 CET the trade balance of the Eurozone for February will come out. The preliminary forecasts are positive which may prevent the decline of the German stock index.
On the daily timeframe, DE30: D1 overcame the support line of the ascending channel and is trying to correct down. The further decrease of the index is possible in case of the escalated political situation over the French presidential elections and Brexit in Great Britain, as well as in case of the publication of weak economic data and corporate earnings in Germany and the EU.
- Parabolic indicator gives bearish signals.
- The Bollinger bands have narrowed, which means lower volatility.
- The RSI dropped below 50. It has formed a weak negative divergence.
- The MACD gives bearish signals.
The bearish momentum may develop in case DE30 drops below the Bollinger band at 11900. This level may serve as the entry point. The initial stop-loss may be placed above the two last fractal highs, the 2-year high, the upper Bollinger band and the Parabolic signal at 12400. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop level at 12400 without reaching the order at 11900 we recommend cancelling the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
| Position | Sell |
| Sell stop | below11900 |
| Stop loss | above12400 |