dax further potential upside 1824852016

Daily Outlook, Thurs 04 August 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has indeed staged the expected rebound right above our predefined medium-term pivotal support of 10060 after it printed a low of 10094 on Wednesday, 03 August during the early European session.

Current price action is now coming close to the first target/resistance at 10280 (today’s Asian intraday high at 10227. Please click on this link for a recap on our previous daily short-term technical outlook/strategy.

Key elements

• Based on the Elliot Wave Principal and fractal analysis, the 3.6% decline from this Monday, 01 August high of 10474 to yesterday’s low of 10094 can be considered as a corrective wave 4/ of a minor degree within a large degree, intermediate term bullish impulsive structure that is still in place since 27 June 2016 low. Current price action has indicated that the low of the corrective wave 4/ of a minor degree has been seen yesterday at 10094 and the Index is likely to see a potential recovery at this juncture to kick start the bullish impulsive wave 5/ of a minor degree.
• The Index has also surpassed above the upper boundary of the “Expanding Wedge” range top (depicted in dotted purple) after a whipsaw around it earlier. The upper boundary of “Expanding Wedge” range top has now turned into a pull-back support at 10170 (see 4 & 1 hour charts).
• The 4 hour Stochastic oscillator is now coming close to an extreme overbought level but no exhaustion sign (bearish divergence) yet. In addition, the 1 hour Stochastic oscillator has just exited the oversold region and still has room to manoeuvre to the upside before reaching its extreme oversold level. These observations suggest that upside momentum of price action in place since yesterday low of 10094 remains intact.
• The near-term resistance to watch now stands at 10380 which is the upper boundary of the significant descending range in place since 12 April 2015 high follow by the next resistance zone of 10530/650.

Key levels (1 to 3 days)

Intermediate support: 10170

Pivot (key support): 10060 (medium-term)

Resistances: 10380 & 10530/650

Next support: 9800

Conclusion

Maintain bullish bias. The Index may see a minor dip first towards the intermediate support at 10170 and as long as the 10060 medium-term pivotal support holds, it is likely to stage a further potential push up to test the 10380 resistance and above it may open up scope for a further upleg to target the resistance zone of 10530/650.

However, a break below the 10060 medium-term pivotal support is likely to invalidate the preferred bullish scenario for a deeper decline towards the next support at 9800 (the former minor swing high area of 04 July 2016 that has been tested several times at the swing lows of  06 May to 24 May 2016).

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