dax daily outlook fri 08 jan 2016 potential short term recovery above 9800750 support 1792372016

(Click to enlarge charts)

What happened yesterday

The Germany 30 Index (proxy for the DAX) has continued to decline as expected and hit the expected downside target at 9800 in the today’s early Asian session. Bear in mind that 9800 is a significant inflection level (more details below).

Please click on this link for a recap on our previous short-term daily outlook/strategy

Key elements

• The Index has now stabilised on a key inflection level of 9800/750 which is defined by the lower boundary (support) of a long-term ascending channel in place since September 2011  (the onslaught of the European sovereign debt crisis) and a Fibonacci cluster (see weekly chart)
• On a medium-term, the Index is likely to be evolving within a “Symmetrical Triangle” range configuration in place since 13 April 2015 all-time high. Current price action has reached the range support which also confluences with 9800/9700 (see daily chart).
• In the shorter-term, the Index is still being capped by a descending channel resistance now at 10040.
• The next resistance to watch will be at 10340 which is defined by the 50% Fibonacci retracement of the steep down move from the start of 2016 to today’s current low of 9795 and the former congestion area seen from 28 August 2015 to 16 September 2015.

Key levels (1 to 3 days)

Pivot (key support): 9800/750

Resistance: 10040 & 10340

Next support: 9300

Conclusion

Current technical elements are advocating for a potential recovery at least in the short-term. Pivotal support at 9800/750 and a break above 10040 is likely to add impetus for a further push up to target the next resistance at 10340.

However, failure to hold above the 9800/750 pivotal support may jeopardise the expected short-term recovery scenario to see a further plunge towards the next support at 9300 (the swing lows area of “Black Monday”, 24 August 2015 and 29 September 2015).

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