Risk/Reward Ratio Supports Short

٢٧ أغسطس ٢٠١٥

From its peak in April 2015, the DAX has lost about 20% in the context of global stock market declines over the last couple of weeks. This week, the index managed to stop its downward trend at its supportive multi-year up-trend. The general picture supports the view, however, that we have not yet seen the trough. In order to brighten up the chart, the DAX would have to rise above the downward trendline at about 11,000. More likely, in my view, is that the index will approach and test its 200/250 moving averages and perhaps the flatter up-trend at just above 7,000. The risk/reward ratio certainly seems to support being short: While the upside is limited, the downside potential is significantly larger.