Two trades to watch: DAX, FTSE

DAX edges higher, IFO business sentiment report in focus

The German Dax, along with its European peers is opening the week on the front foot, after booking a loss across the previous week of 0.3%.

The market mood is broadly upbeat with European indices tracing Asian markets higher as earnings season really gets under way.

The economic calendar is light with the focus firmly on German IFO business sentiment. Supply chain bottlenecks and rising prices have weakened business sentiment and the outlook for business in the Eurozone’s largest economy. The IFO business climate has fallen for four consecutive months. Expectations are for a further move lower to 97.9 down from 98.8.

Where next for the DAX?

The rebound in the DAX from 14812 has taken the descending trendline dating back to early September but is struggling to push beyond the confluence of the 50 & 100 sma at 15600 on the daily chart. The RSI is mildly above 50 keeping buyer’s hopeful of further upside.

A move above 15600, which could prove a tough nut to crack is needed to attack 15780 a level which offered resistance on several occasions across September before 16000 is targeted and fresh all-time highs.

On the flip side a move below 15400 could open the door to horizontal support at 15300. A move below here could negate the near term up trend and open the door to 15000.

FTSE rises after HSBC beats forecast

The FTSE looks set to outperform its European peers on the open as metal prices jump and HSBC reports encouraging earnings.

The heavyweight bank reported a 76% jump in Q3 profit to $5.4 billion ahead of expectations. Revenue came in at $12 billion, up 0.7% compared to a year earlier but below $12.3 billion forecast. Whilst the bank didn’t announce any dividends for the third quarter it did say it had plans to start a $2 billion share buyback shortly.

Separately metals jumped higher at the start of the week and oil reached a fresh multi year high which is likely to boost resource stocks on Monday.

Where next for the FTSE?

After breaking out above the descending trendline resistance and hitting a fresh post pandemic high at 7250 the FTSE has been in consolidation mode.

The FTSE trades above its 50 & 100 sma & the RSI is supportive of further upside. Buyers could look for a move above 7250 for fresh post pandemic highs.

7165 is a key support.  Upon testing this level the price could rebound higher one more. Seller could look for a move below this level to, which could open the door to 7130 the trendline support and 7100 the 50 & 100 sma.