 Good morning and welcome to the chart of the week video with me David Madden today's date is Friday the 38th of October 2020 and the time has just gone 11 31 GMT and this week's chart of the week is the DAX or as we call it here at CMC the Germany 30 If you take a look at the wider trend the market at a fantastic run between mid-march through to September Where it hit its highest level a since Since February some multi month highs were achieved only not that long ago at the beginning of September and since then We see a turn lower. We can see here. We've had a nice series of lower lows and lower highs the last few sessions we've We've seen a particularly aggressive sell-off But what I want to talk about in this video is are we gonna kiss? Are we going to see a continuation of the wider negative trend of the negative trend of the last few weeks of months Or are we going to see a bit of a bounce back? Now take a look at the price action. It's been moving aggressively lower particularly in the last few sessions Essentially driven by fears that the German economy and other European economies are going to come are going to come under a strain because of new Lockdown restrictions that are going to come into play But financial markets don't move in straight lines So we've had a very aggressive move in the downside We moved quickly below the two-day moving average and we can see here We're back at multi-month lows on the DAX now The question is could we see a bounce back and if you take a look at today's candle obviously today's trading session hasn't ended But if you take a look at today's candle, it's already shape. It's already Taking the potential shape of a hammer formation Now what is a hammer formation? Well, this is a textbook example of a hammer formation whereby you have an aggressive move to the downside a series of lower lows and lower highs and and a negative Barish candles and then this candle here has a very very long wick Which is going to denote in decision and then notice how that only does a close Higher than we're open creating a positive candle Also, it closes well above well both the open and the close of the previous day session So essentially the what you would like to see is if we see a similar formation to this replicated On the DAX today that could be the sign that we would be in for a turnaround potentially now That's just having this formation on its own in itself isn't a guarantee of a hammer formation You want to see confirmation and by confirmation what you want to see is you want to see the market move higher in the next couple of sessions and then we could potentially see a wider rebound So the long wick to notice in decision we could be looking at a point whereby the market's already Above it's open of the session. So so we have potential to form a hammer If you look to kind of ideally you want to see the market close A fair bit higher than it's open and the market close around the high of the day If that is the case and we are looking to rebound work We potentially head back to it. Well, we could head back up to 12,000 It's a You know, it's a big number and if you just go beyond 12,000 You could also head up toward this red line here the 200 a moving average Notice how it acted nicely a support in late july it briefly acted as support At the beginning of this week. Um, so this this entire zone of say 12,000 up to 12,088 Could act potentially As a as a resistance zone should you move upward from here? And if you go beyond that We get that we then really need to be kind of taken out this yellow line here the 100 a moving average at 12,738 On a few occasions the market traded below it But it's sort of active support on a few occasions In the months of in in september and october And then if you go beyond that we could then be looking at retesting the kind of the highest that we've achieved in early october early to mid october But conversely, uh, what happens if you move lower if this doesn't turn out to be hammer formation And if you move lower and we take out the recent lows, that will be yet again another multi month low That could that could easily be interpreted as a sign that the recent downward trend is still very much in play And we could head back down toward this area here down around 11,000 Not only is it a big number But also we have seen a bit of consolidation in that zone back in may When the market was pushing higher Now if you're going to be trading the DAX or quite frankly if you're going to be trading any of the indices It's always worth you while looking at what other other markets are doing So we talked about a potential of a hammer formation on the DAX What do we see here on the footsie 100? We see a similar situation whereby today's candle has created another multi month low But it's a very long week on it So that that denotes indecision It's a possible it's a possibility that we could see a hammer formation on the footsie 100 And if you take a look at what's going on with the s&p 500 It's a similar situation again, obviously cash trading in new york hasn't opened yet But similar to the DAX whereby we've had a series of bearish candles. We've been pushing lower Uh, we we've had a long a relatively long week on this candle here denotes indecision already It appears to be in the potentially forming a hammer formation. Obviously the trading day isn't over yet So if we were to see a hammer formation Across all those three candles all those three markets You could then become more confident that we're going to see a rebound in global stocks If none of them form form hammer formations could be and the take out the recent lows That could be a sign that we're in for further further falls on the DAX and other markets But ultimately, um, the tender of dow theory states that the averages must confirm each other which essentially means Average markets that are quite similar Uh, they should be you know, they If they move in a similar direction at the same time, you can be more confident of that particular move Uh, that's all from this video. Uh, best of luck with your trading week ahead of you. Have a good training week and good luck