The German DAX cash index traded higher during the European day Tuesday, after it hit support marginally below 10700 on Monday. Although the index continues to trade below the downside resistance line taken from the high of the 27th of September, after bottoming on the 27th of December, it has been printing higher peaks and higher troughs above a new short-term upside support line. Therefore, we see the case for the recovery to continue for a while more, perhaps until the price challenges the aforementioned downside resistance line.
Now, the price looks to be heading towards yesterday’s high, at around 10900, an area that also provided decent resistance on the 14th and 17th of December. If the buyers are willing to drive the action above that zone soon, then we may see them aiming for the 11000 territory, which is slightly above the high of the 13th of December, and also proved a good support on the 20th of November. Another break above 11000 could allow the index to travel towards the crossroads of the 11140 hurdle and the downside resistance line drawn from the peak of the 27th of September.
Looking at our short-term momentum studies, we see that the RSI, already above 50, has turned up again and could be heading towards its 70 mark. The MACD is also within its bullish territory, and even though below its trigger line, shows signs that it could turn north as well. It may cross back above its trigger line soon. These indicators detect upside momentum and support the notion for some further recovery.
On the downside, we would like to see a clear dip below 10550 before we abandon the near-term bullish case. Such a move could confirm the break below the upside support line taken from the low of the 27th of December and may initially aim for the 10400 zone, which prevented the price from traveling south on the 2nd, 3rd and 4th of January. If that zone fails to withhold the pressure this time and breaks, then we may experience extensions towards the low of the 27th of December, at around 10280.
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