dax weekly outlook 31 aug to 04 sep mixed elements turn neutral between 10440 10060 1167692015

(Click to enlarge charts)

What happened last week

The German 30 Index (proxy for the DAX) has pierced below the 9600 long-term key support before staging the expected push up towards the 10280/10440 resistance zone.

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

Key elements

• The Index has managed to stage a rebound from the long-term key support zone of 10013/9600 defined by the 34-month Moving Average (in red), ascending trendline (in orange) joining the lows since 11 September 2011 and the 38.2% Fibonacci retracement of the broad up move from 11 September 2011 low to 05 April 2015 high (see monthly & weekly charts).
• At the end of the week, the Index has managed to shape a weekly bullish “Hammer” candlestick pattern after a 24% steep decline seen from the 12400 April 2015 high. This observation suggests a potential bullish reversal for the Index (see weekly).
• The weekly (long-term) Stochastic oscillator has flashed a bullish divergence signal at its oversold region. This observation is similar to the occurrence during the 03 August 2014 to 12 October 2014 period where the Index has tested the long-term trendline support (in orange) in place since 11 September 2011 low before resuming its upside movement (see weekly chart).
• The recent push up has stalled at the 10440 /10500 resistance which is the pull-back resistance of the medium-term descending channel bearish breakout (in purple) and the 50% Fibonacci retracement of the recent steep down move from 06 August 2015 high @8am to the 24 August 2015 low (see daily chart).
• The daily (intermediate-term) Stochastic oscillator has reached its overbought region which suggest limited upside potential from a multi-week perspective (see daily chart).

Key levels (1 to weeks)

Resistance: 10440 & 11030

Support: 10060 & 9600

Conclusion

Technical elements are mixed on the medium-term (multi-week). Therefore, it will be prudent for us to turn neutral first and wait for clearer elements to emerge.

Only a break above the 10440 pull-back resistance of the former descending channel bearish breakout is likely to trigger a further recovery to target the next resistance at 11030.

On the other hand, failure to hold above the 10060 support may see a slide to retest the long-term key support at 9600.

Source:  Charts are from eSignal & City Index Advantage Trader

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.