dax daily outlook fri 28 aug mixed elements watch the 1050010650 resistance 1141682015

(Click to enlarge charts)

What happened earlier

The German 30 Index (proxy for the DAX) has inched up higher yesterday reinforced by better than expected U.S. Q2 GDP and jobless claims data.

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

Key elements

• Yesterday’s price action of the Index has pierced above the short-term trendline resistance (in dotted pink) joining the highs since 11 August 2015 @8am now turns pull-back support at 10130 (see 3^rd chart).
• Despite the slight push up in price action, the Index did not reintegrate back into the pull-back resistance of the medium term descending channel breakout (in purple) at 10500 which also confluences with the 50% Fibonacci retracement of the recent steep down move from 06 August 2015 high @8am to 24 August 2015 low (see 3^rd chart).
• The hourly Stochastic oscillator has dipped back into the extreme oversold level (see 3^rd chart).
• However, the daily (intermediate term) Stochastic oscillator is coming close to its extreme overbought level which suggests limited upside potential (see 1^st chart).
• The 10650 resistance is the former 07 July 2015 swing low (see 1^st chart).
• As per mentioned in yesterday’s outlook, the DAX and EURUSD are inversely correlated. The EURUSD has broken below the pull-back support of the “Symmetrical Triangle” bullish breakout at 1.1290 but still holding above the trendline support joining the lows of 05 August 2015 and 19 August 2015. If the EURUSD does not recover at this juncture and continues to slide, it is likely for the DAX to be supported for a further rise (see 2^nd chart).

Key levels (1 to 3 days)

Resistance: 10500/10650 & 11100

Support: 10130 & 9730

Conclusion

Even though the Index remains below the 10500/10650 resistance, we decided to turn neutral at this juncture due to mixed technical elements.

Only a crack below the intermediate pull-back support at 10130 is likely to trigger a deeper slide to test the next support at 9730.  On the flip slide, a clearance above 10500/10650 may open up scope for a further rally to target the next resistance at 11100.

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