dax daily outlook fri 13 may 2016 short term bearish trend remains intact below 9922 resistance 1811

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has staged an initial push up (noise) above the short-term pivotal resistance at 10024 before the outcome of Bank of England’s monetary policy decision.

Interestingly, the push up in price action stalled at the 10106/165 weekly medium-term pivotal resistance set at the start of this week (recap over here) and reversed down sharply below the 10024 short-term pivotal resistance after Bank of England’s press conference. A classic example of a bull-trap.

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

Key elements

• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be undergoing a potential bearish downleg wave 5 of a minor degree that started from the high of 10111 seen on 10 May 2016. This potential downleg wave 5 appears to be evolving in an extended form to see the completion of the bearish impulsive wave structure/cycle, labelled as 1/ of an intermediate degree in place since 21 April 2016 high of 10527.
• The significant short-term resistance now stands at 9922 which is defined by the “overlap” minor swing highs/lows of 05 May/12 May/13 May 2016.
• The next short-term support below our current short-term downside target of 9780/30 rests at 9620 which is defined by a Fibonacci projection cluster and close to the 50% Fibonacci retracement of the rally from 11 February 2016 low to 21 April 2016 high of 10527.
• The hourly (short-term) Stochastic oscillator is now coming close to an extreme oversold level which highlights the risk of a minor rebound at the 9780/30 level.

Key levels (1 to 3 days)

Pivot (key resistance): 9922

Supports: 9780/30 & 9620

Next resistance: 10106/165 (weekly pivot)

Conclusion

The medium-term bearish trend in place since 21 April 2016 high remains intact. On the short-term, we cannot rule out a potential minor rebound to occur at the 9780/30 short-term support and without surpassing the latest daily short-term pivotal resistance set at 9922, the Index may see another downleg to target the next support at 9620.

On the other hand, a break above the 9922 short-term pivotal resistance is likely to negate the bearish tone to see a push up to retest the 10106/165 resistance (minor swing high area of 10 May 2016 + current weekly pivotal resistance).

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.