DAX: Potential bearish breakdown below 12900 on Middle East tensions

DAX bears claws are getting ready to strike, watch 12900.

Medium-term technical outlook on DAX (Germany 30)

click to enlarge charts

This analysis is an update to our earlier weekly stock indices outlook report published on Mon, 06 Jan (click here for a recap).

Key Levels (1 to 3 weeks)

Intermediate resistance: 13150

Pivot (key resistance): 13450

Supports: 12900, 12790 & 12600/500

Next resistances: 13600/750 & 14115

Directional Bias (1 to 3 weeks)

Key elements of the Germany 30 Index (proxy for the DAX futures) are now advocating for potential bearish breakdown below a 4-week old range configuration in place since 19 Nov 2019. Flip to a bearish bias below 13450 key medium-term pivotal resistance and a break below 12900 reinforces a potential corrective down move sequence within a major uptrend phase to target the next supports at 12790 and 12600/500 next.

On the flipside, a clearance above 13450 invalidates the bearish tone for a probe on the current all-time all high area of 13600/750. Only a daily close above 13750 opens up scope for a more pronounced rally to target the next resistance at 14115 (Fibonacci expansion cluster).

Key elements

  • Since its swing high of 19 Nov 2019, the price action of the Index has traced out a medium-term bearish reversal “Double Top” configuration with its neckline support at 12900 and potential bearish breakout exit target at 12600 that confluences with the former swing high areas of 13 Sep/22 Sep/01 Oct 2019.
  • The daily RSI oscillator is now looking vulnerable to the downside as it is testing a key corresponding support at 45 level the 3rd time with a prior bearish divergence signal. These observations suggest medium-term downside momentum of price action is building up.
  • The 12600/500 medium-term support is also defined by a Fibonacci cluster (38.2% retracement of the prior multi-month up move from 15 Aug 2019 low to 02 Jan 2020 low & 1.618 expansion of the latest slide from 03 Jan 2020 high to 06 Jan 2020 low projected from 07 Jan 2020 high.

Charts are from City Index Advantage TraderPro & eSignal

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