dax current up move is likely to be extending above 10630 support 1826372016

Daily Outlook, Friday 12 August 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) had performed better than our expectation as it did not shape that “final dip” towards the 10580 intermediate support (only printed a low 10632 in yesterday, 11 August European session) before it staged the up move to surpass the 10710 minor resistance.

Please click on this link to recap our previous daily short-term technical outlook/strategy

Today key Germany & Eurozone economic data/releases as follow:

• Germany Q2 GDP (preliminary) @0600 GMT (1.5% y/y consensus)
• Eurozone Q2 GDP (preliminary) @0900 GMT (1.6% y/y & 0.3% q/q consensus)
• Eurozone Industrial Production for Jun @0900 GMT (0.7% y/y & 0.5% m/m consensus)

Key elements

• Based on the current price action and Elliot Wave Principal/fractal analysis, it is likely that the Index is undergoing a potential extended minor degree bullish impulsive wave 3 in place since 04 August 2016 minor swing low of 10180 (minor degree wave 2). The projected end target of the extended bullish impulsive wave 3 stands at 10870/90 and 11010.
• From the 05 August 2016 minor swing low of 10213, there is a clear upside acceleration of price action as it has started to evolve into a steeper bullish ascending channel (depicted in dark blue). This acceleration in price action via channelling technique reinforces the aforementioned potential extended minor degree bullish impulsive wave 3 (see 1 hour chart).
• The steeper ascending channel’s upper boundary also coincides closely with the upper limit of the projected target for the extended wave 3 at 11010.
• Upside momentum remains intact. The daily RSI oscillator is still positive as it has not flashed any bearish divergence signal and it still has some room to manoeuvre to the upside before reaching an extreme overbought level. These observations suggest that a pull-back/consolidation is unlikely at this juncture.
• Another significant resistance to watch below 11010 will be the 10870/990 zone  which is our medium-term target set for this week as per defined by the medium-term swing high areas of 07/30 December 2015 and a Fibonacci cluster.
• The significant short-term support now rest at the 10700/630 zone which is defined by the lower boundary of the steeper ascending channel, minor swing low areas of 10/11 August 2016 and the 23.6% Fibonacci retracement of the recent rally seen from  04 August 2016 low of 10180 to yesterday’s high of 10742.

Key levels (1 to 3 days)

Intermediate support: 10700

Pivot (key support): 10630

Resistances: 10870/990 & 11010

Next support: 10530

Conclusion

Maintain bullish bias with a tightened pivotal support. The on-going rally seen from the minor swing low of 04 August 2016 appears to be extending. As long as the 10630 daily short-term pivotal support holds, the Index is likely to see another round of potential up move to target the next resistance at 10870/990 and even 11010.

However, failure to hold above the tightened 10630 short-term pivotal support is likely to invalidate the preferred direct rise scenario for a pull-back towards the next support at 10530 (the ascending trendline as depicted in green in place since the medium-term swing low of 03 August 2016).

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