dax daily outlook fri 26 feb 2016 bullish tone has resurfaced watch the first resistance at 9430 179

(Click to enlarge chart)

What happened yesterday

The Germany 30 Index (proxy for the DAX futures) has broken above the 9350 short-term pivotal resistance and invalidated our preferred scenario for a second round of downleg on the pull-back/consolidation that started from the 9580 swing high seen on 23 February 2016.

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

Key elements

• Yesterday price action has broken above the upper boundary of a short-term descending channel at 9350. After a closer inspection, the plunge to hit a low of 9123 printed on 24 February 2014 may be the low of the expected pull-back/consolidated of the first phase of the countertrend rally. It came close to our medium-term downside target of 9100 which is the former swing high area seen on  10 February 2016 turns into a support on 17 February 2016 (price action tested and staged a rally of 5.3% to the 9580 high seen on 23 February 2016). Click here for a recap.
• Based on the Elliot Wave Principal, the 9123 low seen on 24 February 2016 coincides with the 50% Fibonacci retracement of the first phase of the countertrend rally low from 11 February 2016 low to 23 February 2016 high. This 50% retracement level can also be considered as the “standard” target for the low of a pull-back/consolidation despite not reaching the “perfect” golden ratio of 61.8% retracement.
• The short-term resistance stands at 9430 which is defined by the minor swing high seen on 24 February 2016 @3pm before the steep plunge occur and also the 61.8% Fibonacci of the pull-back from 23 February 2016 high to the 9123 low.
• The significant support now rests at 9330/9285 which is defined as the former minor swing high area of 25 February 2016 and the trendline support from 24 February 2016 low of 9123

Key levels (1 to 3 days)

Pivot (key support): 9330/285

Resistances: 9430 & 9580

Next support: 9120/9100

Conclusion

Technical elements have started to turn positive for the Index and the potential low of the pull-back/consolidation leg is likely to have concluded at the 9123 level. As long as the 9330/285 short-term pivotal holds and a break above the 9430 resistance is likely to trigger a further push up to retest the 9580 near term swing high are of 23 February 2016 in the first step.

However, a break below the 9330/285 pivotal support may negate the expected short-term bullish tone to see a drop back towards the 9120/9100 support.

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