dax weekly outlook for 09 feb to 13 feb potential intermediate term decline intact below 11000 17958

What happened last week

The German 30 Index (proxy for the DAX) has managed to hit the lower limit of our upside target at 10960 as expected. Please click on this link for more details on our last weekly outlook.

Key elements

• Price action has reacted off the upper boundary of the shorter-term ascending channel (in light blue) in place since 16 October 2014 low now at 11000 (see daily chart).
•  The intermediate term RSI oscillator has flashed a bearish divergence signal and still has “room” for further downside before reaching its trendline support (see daily chart).
• The upper and lower boundaries of the long-term ascending channel (in orange) in place since September 2011 now stands at 11250 and 9600 respectively (see daily chart).
• The 200-day Moving Average is acting as a support at around 9600 (see daily chart).
• The 10400 and 10195 support levels also correspond closely with the 38.2%/50% Fibonacci retracement from 06 January 2015 low to 03 February 2015 high.
• The short-term Stochastic has just exited from its oversold region and still has “room” for potential upside before reaching its “extreme” overbought level (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate resistance: 10790

Pivot (key resistance): 11000

Support: 10400 & 10195

Next resistance: 11250 & 11455/11505

Conclusion

Elements are advocating for the start of a potential intermediate term decline within a multi-month bullish trend in place since 16 October 2014.

Given the observation seen in  the short-term Stochastic oscillator (4 hour), the Index may see a push up first towards the intermediate resistance at 10790 with a maximum limit set at the 11000 weekly pivotal resistance before another slide occurs towards the 10400 support.

On the other hand, a break above 11000 is likely to see a push up to test 11250 and only a clearance above it may trigger a further upside movement to target the long-term resistance at 11455/11505 (see weekly chart).

Disclaimer

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