dax weekly outlook for 11 may to 15 may bullish tone remain intact but potential pull back first tow

(Click to enlarge charts)

What happened last week

The German 30 Index (proxy for the DAX) has tested but managed to stage a strong rebound from the 11190 weekly pivotal support as expected.

Please click on this link for more details on our previous weekly outlook.

Key elements

• Price action has tested and managed to rebound from the pull-back support of the former long-term ascending channel bullish breakout (in orange) at 11190 (see weekly chart).
• Price action has formed a weekly bullish “Hammer” candlestick pattern at the 11190 support which suggests a continuation of the medium term bullish trend in place since 16 October 2014 (see weekly chart).
• The long-term Stochastic oscillator has just exited from its oversold region (see weekly chart).
• The 11190 support also confluences with the trendline support (in dark blue) joining the lows since 16 October 2014, 100-day Moving Average (in light green) and the 38.2% Fibonacci retracement from 16 December 2014 low to 13 April 2015 high (a typical wave 4 target based on the Elliot Wave Principle) (see daily & 4 hour charts).
• Current price action is testing the upper boundary (resistance) of the short-term descending channel (in dotted red) in place since 13 April 2015 high at 11750 (see 4 hour chart).
• The short-term Stochastic oscillator has exited from the overbought region and still has “some room” for further downside before reaching its oversold region. This observation highlights the risk of a short-term pull-back in price action of the Index (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate support: 11520/11450

Pivot (key support): 11190

Resistance: 11750, 12050 & 12400

Next support: 10600

Conclusion

Current technical elements have suggested the down movement from 13 April 2015 high is likely to have ended and the Index should resume its medium term bullish trend in place since 16 October 2014.

On the short-term term, below 11750, the Index may see a risk of a pull-back first towards the intermediate support zone at 11520/11450 before another potential upside movement occurs to target 12050 before the 13 April 2015 swing high at 12400.

On the other hand, failure to hold above the 11190 weekly pivotal support may see another round of waterfall slide towards the next support at 10600.

Disclaimer

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