The German DAX cash index traded lower today, after it hit resistance slightly below the 15795 barrier yesterday, marked by the peak of September 19th. Overall though, the index remains above the upside support line taken from the low of October 6th, as well as above the prior downside resistance line drawn from the high of August 31st. In our view, this keeps the near-term outlook positive.
Therefore, even if we see some further retreat in the short run, we will see decent chances for market participants to jump back into the action from near the 15630 zone, marked by the inside swing high of October 17th. This may result in a rebound back near the 15795 zone, the break of which would confirm a forthcoming higher high and may see scope for extensions towards the peak of September 6th, at 15960.
Shifting attention to our short-term oscillators, we see that the RSI exited its above-70 zone and moved lower, while the MACD, although above both its zero and trigger lines, shows signs that it could fall back below its trigger line soon. Both indicators suggest that some ease of the index’s upside speed, which supports the notion for some further retreat before the next leg north.
On the downside, we would like to see a dip back below 15530 before we abandon the bullish case. This could confirm the break below the upside line taken from the low of October 6th and may initially target the 15460 or 15415 zones marked by the lows of October 21st and 18th respectively. If neither barrier is able to stop the slide, then we may experience extensions toward the 15925 area, marked by the inside swing high of October 3rd.
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