dax daily outlook fri 22 jan 2016 95509400 support for today to keep potential snap back rally intac

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What happened yesterday

The Germany 30 Index (proxy for the DAX) has tested the 9400 intermediate support and rallied off from it as expected This bullish price action is being reinforced by yesterday’s European Central Bank press conference where Mario Draghi, the central banker mentioned that the ECB may need to review its current monetary policy in the next meeting in March, hinting of a possible increase in monetary stimulus.

In today’s 22 January 2016 Asian session, the Index has continued to rally and it is now coming close to our expected short-term upside target of 9780 (printed a current high of 9650).

Please click on this link for a recap on our previous daily outlook/strategy.

Key elements

• The Index has broken above the “Descending Wedge” configuration’s upper boundary now turns pull-back support at 9400.
• From the key medium-term support of 9300, the Index is now evolving into a short-term bullish ascending channel with its lower (support) and upper (resistance) boundaries at 9550 and 9880 respectively.
• The upper boundary of 9880 also confluences with the  1.618 Fibonacci projection of the current up move from 9300 support to 21 January 2016 high @11am projected from 21 January 2016 low @10pm and the 9935 minor swing high of 15 January 2016.
• The daily (medium-term) RSI oscillator still has some room to manoeuvre to the upside before reaching its resistance. This observation reinforces our preferred mean reversion/”snap-back” rally scenario and still has further potential upside.

Key levels (1 to 3 days)

Intermediate support: 9500

Pivot (key support): 9400

Resistance: 9780 & 9880/9935

Next support: 9300 (trigger) & 9070/45

Conclusion

Current technical elements are still positive to support our mean reversion/”snap-back” rally view. We have tightened the short-term pivotal support to 9400 and look for another potential upleg for the Index to target the next resistance zone at 9880/9935.

Only a clear break below the 9300 key medium-term support is likely to invalidate the mean reversion scenario to see the continuation of the down trend towards the next support at 9070/45.

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