dax daily outlook for thurs 13 aug potential short squeeze in progress above 11000 support 102077201

(Click to enlarge charts)

Key elements

• The German 30 Index (proxy for the DAX) has managed to hold above the pull-back support of the former descending channel bullish breakout at 11000 despite yesterday’s sharp downward movement seen in the late European session (see daily chart).
• Yesterday’s price action has created a “bear trap” scenario as the Index has “recaptured” the 11030/11000 support level (see 1 hour chart).
• The hourly RSI oscillator has flashed a bullish divergence signal at its oversold region which suggests that the recent downside momentum has abated (see 1 hour chart).
• The 11370/11400 pull-back resistance also corresponds closely with the 61.8% of the recent steep downside movement from 06 August 2015 high @4pm to the 12 August 2015 low@10pm (see 1 hour chart).

Key levels

Pivot (key support): 11030/11000

Resistance: 11200 & 11370/11400

Next support: 10890 & 10600

Conclusion

Technical elements have suggested a potential “bear trap” scenario for the Index above the 11030/11000 daily pivotal support. A break above the 11200 intermediate resistance is likely to trigger a further rally to target the 11370/11400 zone.

On the flipside, a crack back below the 11000 support is likely to see a retest on yesterday’s low at 10890. Failure to hold above 10890 is likely to see the continuation of the waterfall slide to target the long-term support at 10600.

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