DAX Soars With Commodity Prices. Can the Index Breach The 10700.00 Handle?

European stocks traded higher on Tuesday, with gains in commodity producers, banks and optimism over easy monetary policy in the Euro Zone helped shares rebound from losses suffered on Monday. The DAX30 index has added 1.24% so far to 10,633.85.

A soft U.S dollar helped lift oil and metal prices, which subsequently pushed up share prices of German energy companies. Shares of RWE – Germany’s second-largest utility – topped the market, soaring more than 3% after it reported a 10% increase in profits for the first half of 2016. The company has benefitted from the restructuring of its UK business which had been started in March. The firm said the program will take around two years to complete and will cost about 2,400 jobs from its 11,500-strong workforce.

RWE reported that its net income in the first half of this year reached €598 million ($659 million), and reiterated its earnings forecast for the full year of between €500 million and €700 million.

RWE’s rival, energy supplier EON has also had a nice performance today. Stocks of EON rose by 1.95% thus far, remaining one of the biggest gainers in the market, fueled by rising oil prices.

Mohammad Barkindo, Secretary General of the OPEC on Tuesday reinforced the participation of Russia in the highly anticipated plan to limit global oil production. Speaking at the sidelines of the “Oil & Money” conference in London, Barkindo said that Russia has been very active in trying to stabilize the oil market and that he will meet with Russia’s Energy Minister Alexander Novak next Monday to discuss the details of the output cut plan.

Out of the 30 companies in the DAX 30 index, only shares of Continental AG were trading lower today. The Hanover-based company cut its 2016 profit forecast, citing warranty costs and antitrust-fine provisions as factors that will dent profits. Higher research and development spending, as well as costs from disruptions at a supplier in Japan because of an earthquake in August will also contribute to a 480 million-euro ($529 million) fall in operating profit.


Fig: DAX 30 technical chart

The DAX30 not only created a big gap up on the opening today, but also took off to a one-week high at around 10656.26. The strength of the recent rally can be seen on the price chart with recent candles showing almost no upper shadows. The price action has solidly crossed over both MA’s from below, with both moving averages placed below the price action and the RSI above 50. The DAX may come up against stiff resistance at the  10700.00 threshold.

Trade suggestion

Buy Stop at 10660.00, Take profit at 10700.00, Stop loss at 10600.00

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