dax pull back towards 10505380 support before new potential up move 1828152016

Daily Outlook, Thursday  25 August 2016

(Click to enlarge chart

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has staged an initial dip but managed to hold above the predefined intermediate support of 10505 as expected. Thereafter, it has staged a rebound to retest the minor range top in place since Monday, 22 August 2016 at 10640 before it traded sideways throughout yesterday’s late European session.

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

Today key Germany/Eurozone economic data releases as follow:

• Germany IFO Business Climate Survey for Aug @0800 GMT (108.5 consensus)

Key elements

• The Index has struggled again on the third attempt to break above the 10640 minor range top in place since this Monday, 22 August 2016.
• On the positive side, it remains supported by the lower boundary of the medium-term bullish ascending channel in place since 06 July 2016 low at 10505 which is also just above the predefined medium-term pivotal support of 10380 set for this week.
• The upper boundary of the aforementioned bullish ascending channel stands at 11050 which also confluences with a Fibonacci cluster at 10990/11050.
• Based on the Elliot Wave Principal/fractal analysis, we are still in favour that the Index is now likely undergoing the minor degree bullish impulsive wave 3 in place since this Monday, 22 August low of 10387 with a minimum potential end target (wave equality of minor degree wave 1) at 11080 which is closed to the upper boundary of the aforementioned ascending channel.
• The hourly (short-term) Stochastic oscillator is now coming close to an extreme overbought level which highlights the risk of another round of minor decline to test the intermediate support at 10505.

Key levels (1 to 3 days)

Intermediate support: 10505

Pivot (key support): 10380

Resistances: 10640, 10806 & 10990/11050.

Next support: 10090

Conclusion

Maintain bullish stance with risk of an initial minor decline. The Index may see a slide first to retest the lower boundary of the bullish ascending channel at the 10505/380 support zone before another potential rally materials towards the minor range top at 10640 before targeting next resistance (minor swing high area of 15 August 2016)  at 10806 in the first step.

On the other hand, failure to hold above 10380 key medium-term support is likely to invalidate our preferred medium-term bullish view to see the start of a corrective decline but not a bear market crash at this juncture. The next support rests at 10090 which is defined by the medium-term swing low area of 03 August 2016 and close to the 50% Fibonacci retracement of the entire up move from 24 June 2016 low to last week high of 10806.

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