Featured Trade: Potential pull back for DAX

Overextended rally for DAX, risk of a minor pull-back.

Short-term technical outlook on DAX/Germany 30 Index (Thurs 04 Apr)



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Key technical elements

  • From its 25 Mar 2019 swing low of 11270, the Germany 30 Index (proxy for the DAX futures) has staged a rally of 6.3% to print a high of 11978, a 5-month high since 16 Oct 2018. It also has reintegrated back above the former neckline support of the major “Head & Shoulders” bearish reversal configuration at 11800.
  • The on-going swift rally from its 25 Mar 2019 swing low has led the daily RSI oscillator to hover at its overbought region and the shorter-term hourly RSI oscillator has broken down below a significant corresponding ascending trendlline support in place since 25 Mar 2019 low (starting point of the on-going swift rally). These observations suggest that the current up move is overstretched and the risk of a minor pull-back in price action increases at this juncture.
  • The next significant near-term supports rest at 11800 (the reintegration level of former Head & Shoulders” neckline & 23.6% retracement of the swift rally from 25 Mar 2019 low to 03 Apr 2019 high) and 11630 (minor ascending trendline from 26 Mar 2019 low & 50% retracement of the swift rally from 25 Mar 2019 low to 03 Apr 2019 high).

Key Levels (1 to 3 days)

Pivot (key resistance): 11980

Supports: 11800 & 11630

Next resistance: 12100 (upper limit of long-term pivot)

Conclusion

If the 11980 key short-term pivotal resistance is not surpassed, the Index is likely to shape a potential pull-back to target the 11800 near-term support and a break below it sees a deeper pull-back towards 11630.

On the other hand, a clearance above 11980 sees the continuation of the rally towards next resistance at 12100 (upper limit of the long-term pivot & primary descending trendline from 23 Jan 2018 high).

Charts are from City Index Advantage TraderPro




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