(MENAFN- DailyFX (IG)) Last week's trading outcome

Chris Beauchamp: Hello and welcome to "Trade of the week" for the week beginning Monday 20th October. Axel is off in Japan having a nice, well-deserved break for two weeks, so you get me for "Trade of the week" instead this week.

Before we go on to this week's trade, let's go back to last week. Axel went short natural gas, and it always pains me to do this, but it didn't quite work out. He had his stop at 3570, I think it was, and as you can see on the natural gas chart, there's that gap higher this morning. We had the rebound on Friday as I think a lot of the panic around markets really began to ease. We had a week of panic really which was very interesting in terms of sentiment.

And then natural gas, a sharp recovery on Friday and, indeed, has just gone completely mad in opening trading, I think is probably the technical term for this morning. Up 5% for natural gas and showing no sign of slowing down either. So, that puts us back on course to target these early October highs at 3800. Crucially, that also puts us above that July high at 3650.

And, for fans of higher highs and higher lows, that's what you've got forming here off the back of that. If this one continues, as it certainly looks like, you've got a higher low in place here after the one in late September. So that one, not a great one, it has to be said. But that is the point of trading. They don't always work out.

This week's trading opportunity

Let's move on to this week's "Trade the week" for Monday 20th October. We're going to go long the DAX 40 because this is an interesting one. Big recovery here since those September lows around 23,400. The support zone from August and September, dipping into 23,400 and then rallying. You had a big drop, of course, over the past week or so, whcih took us from above 24,600.

We just did nudge out a record high for the index, early in October and then back down again. Quite a nasty jump, but it really found the lows on Friday. You can see a long candle right the way down to 23,600 on the chart. Stabilisation on Sunday, and then it started to move higher today. So that could be the interesting moment.

So, we are looking at going long the DAX 40. This one currently trading at 24,087, with an initial target, we'll assume that we'll see a continuation of this bounce because we're in the fourth quarter (Q4). Tends to be very strong in terms of seasonality for the DAX 40. Everyone's favorite topic at the moment. So, that puts us on course back to those October highs.

The question of the stop, it has to be said, if we go all the way down to below Friday, so that may well be a bit wide, it has to be said. I think it would be a fair thing to say we should put our stop perhaps around 23,850, which is in the middle of that candle. It might offend some of the purists out there. But I would argue that if you see a reversal back to that level, it arguably invalidates that trade.

So if the price does go back down again, be prepared that we might get some volatility around this. That's why we're running a fairly wide stop. If we say 23,850, I think that's probably the best thing to look for.

This week's trade in summary

Looking to go along the DAX 40 for this week for Monday 20th October, with an initial target around 24,600, and our stop at 23,850.

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