dax weekly outlook 12 oct to 16 oct medium term uptrend remains intact above 100079780 support 15534

(Click to enlarge charts)

What happened last week

The German 30 Index (proxy for the DAX) has pushed higher and integrated back above the 10080 pull-back resistance of the medium-term descending channel bearish breakout (in dotted purple as per highlighted in the daily chart). Therefore, the “last push down” scenario to retest the “Black Monday”, 24 August 2015 low of 9320 has been invalidated.

Please click on this link for a review on our previous weekly outlook.

Key elements

• Last week’s price action has continued to rebound higher from the trendline support (in orange) joining the lows since 11 September 2011 after the formation of the prior weekly bullish “Hammer” candlestick patterned sighted for the week ended on 02 October 2015 (see weekly chart).
• The aforementioned trendline support also coincides closely with the “Black Monday”, 24 August 2015 low of 9320 and the 38.2% Fibonacci retracement of the multi-year up move from 11 September 2011 low to 12 April 2015 high (see weekly chart).
• Since the “Black Monday”, 24 August 2015 low, the Index has traced out an impending bullish “Double Bottom” chart formation with its neckline resistance at 10380. This type of bullish chart formation indicates a potential reversal in sentiment from bearish to bullish after a significant decline in price action (the Index has staged a decline of 24% from its current all-time high of 12408 seen on 12 April 2015 to the Black Monday”, 24 August 2015 low) (see daily chart).
• The daily (medium-term) RSI oscillator has broken above its former resistances and the 50% neutrality level. It still has room for further potential upside before reaching the overbought region. This observation indicates that upside momentum remains intact (see daily chart).
• The next significant resistance to watch on the medium-term (1 to 3weeks) will be at 10830 which is defined by the former swing lows in the region of 09 June, 16 June & 18 June 2015 and the 50% Fibonacci retracement of the current steep down move seem from its current all-time high in 12 April 2015 to 24 August 2015 low (see daily & 4 hour charts).
• In the shorter-term, the Index has broken out of a former descending channel (in dotted pink) from the 09 September 2015 high @12pm now turns pull-back support at 9780 (see 4 hour chart).
• Since aforementioned bullish breakout on 07 October 2015, the Index has accelerated to the upside and pierced former resistance zone (as depicted by the orange trendline & dotted purple line in the 4 hour chart) now turns pull-back support at 10007 (see 4 hour chart).

Key levels (1 to weeks)

Intermediate support: 10007

Pivot (key support): 9780

Resistance: 10380 & 10830

Next support: 9320  

Conclusion

Technical elements are still positive. The Index is likely to see a further push up towards the 10380 neckline resistance of the “Double Bottom” chart formation. Thereafter, the Index faces the risk of a pull-back towards the intermediate support at 10007 with the maximum limit set at the 9780 weekly pivotal support before another potential up leg materialises to target the next resistance at 10830.

On the other hand, failure to hold above the 9780 pivotal support may invalidate the expected bullish scenario for another round of choppy price movement for a slide to retest the “Black Monday”, 24 August 2015 low of 9320.

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