dax daily outlook fri 12 feb 2016 coming close to inflection zone potential last drop below 89209130

(Click to enlarge charts)

What happened yesterday

The Germany 30 Index (proxy for the DAX futures) has dropped lower (printed a low of 8696) as expected but it has not met our expected downside target of 8650/580 yet.

Please click on this link for a recap on our previous daily outlook/strategy.

Key elements

• The Index has continued to shape the expected decline and it is now coming close a inflection zone of 8650/350 as per defined by a Fibonacci projection cluster, the swing low of October 2010 and now the lower boundary (support) of the short-term bearish descending channel in place since 01 February 2016 high. Please click on this link for more details as per highlighted in our weekly outlook/strategy.
• Given the confluence of elements that defined the inflection zone of 8650/8350, the Index is likely to see a potential medium-term (1 to 3 weeks) bullish countertrend rally at that juncture after a steep decline since 27 January 2016 (the rejection area from the pull-back resistance of the former long-term trendline support from September 2011 low).
• In addition, the daily (medium-term) RSI oscillator has already dipped into the oversold region and it is coming close to an extreme oversold level where price action of the Index has managed to stage a rebound in the past. This observation gives credit to the potential bullish countertrend movement as downside momentum is being “overstretched”.
• The significant short-term resistance to watch remains at 9130 which is defined by the upper boundary of the short-term descending channel and 10 February 2016 minor swing high.

Key levels (1 to 3 days)

Intermediate resistance: 8920

Pivot (key resistance): 9130

Supports: 8650/580 & 8350

Next resistance: 9300

Conclusion

Bears should be cautious now as we are likely coming to the end of a steep and “easy” downside movement where late bears’ stop-losses can be trigger/squeezed out easily.

As longs as the 9130 short-term pivotal resistance is not surpassed, we are maintaining our bearish stance for a potential last drop towards the 8650/580 support with a maximum limit set at 8350.

On the other hand, a break above the 9130 pivotal resistance is likely to negate the bearish tone for see a further rebound towards the former critical support now turns resistance at 9300.

Disclaimer

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