European energy ministers are set to discuss radical proposals to curb power prices when they hold an emergency meeting on Friday, including gas-price caps and a suspension of power derivatives trading.
While not specific to natural gas, OPEC+ leaders have also agreed to a small 100,000 barrels per month cut to try to stop energy prices from spiking further. Natural Gas prices are currently out of control.
Fears of energy rationing in the region as winter approaches. Investors are also reacting to data showing that Germany’s services sector activity contracted for a second month running.
This all places the Ger40 in a tough spot. The charts are showing a potential double-bottom pattern, however, it could soon turn into a large head and shoulders pattern if losses continue in German stocks.
Looking at sentiment towards the DAX is almost neutral with just 54 percent of traders expecting more gains. This provides the conditions for a continuation of range bound trading activity, not a major break down.
Neutral sentiment biases are often indicative of range bound trading activity. Therefore we probably need to see big bets placed in one direction before a major price move comes.
GER40 Technical Analysis
The GER40 index has formed a bullish reversal pattern, which strongly hints that we are going to see a bullish directional move at some stage, although it is tough to imagine when it may take place.
A break above the 13,000 level could turbo charge the German DAX in future, as the target of the pattern is a huge upside target of approximately 13,500.
The daily time frame shows that the German DAX looks very uncertain after a head and shoulders pattern has been fully activated. This is part of the reason why the Ger40 is bouncing from a technical standpoint.
The final confirmation needed for a medium-term sell signal is sustained move under the yearly low. However, I suspect traders are also watching to see if a double-bottom price pattern forms.