dax daily outlook thurs 14 apr 2016 risk of a short term pull back below 10130150 range top 18061520

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has continued its rally and had a daily close above the 9900 medium-term pivotal resistance. Given yesterday’s price movement, our expected direct medium-term bearish view has been invalidated as the minor rebound has evolved into a pronounced positive feedback loop.  Going forward on the medium-term term (multi-week), there is a possibility that we can see another round of countertrend rally (similar to the previous one seen from 11 February 2016 low to 23 Mar 2016 high of 10118. The weekly close should offer more clarity.

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

Key elements

• The on-going rally is now coming close to the range top in place since 17 March 2016 at 10130 that has rejected previous advances in the past three occasions (in shade pink ovals). In addition, the 10130 range top also coincides with a former long-term trendline support from 11 September 2011 low now turns pull-back resistance (see daily chart).
• The 10130 range top now also coincides closely with a 2.618 Fibonacci projection of the current rally from 08 April 2016 low at 9442 to 08 April 2016 high at 9677 projected from 11 April 2016 low @3pm which gives a level of 10150.
• The near-term support rests at 9950 which is the former resistance and now the pull-back support of the ascending channel (in blue) bullish breakout that has linked up the higher lows from 08 April 2016 low as well as a steeper ascending trendline from 11 April 2016 low @3pm (in green)
• The hourly Stochastic oscillator is coming close to its extreme overbought level where the Index may see the risk of a pull-back in price action at this juncture as upside momentum appears to be “overstretched”.

Key levels (1 to 3 days)

Pivot (key resistance): 10130/150

Supports: 9950 & 9755

Next resistance: 10400

Conclusion

Given that the Index is now hovering just below the range top at 10130/150 and short-term (hourly) momentum indicator appears to be “overstretched” on the upside, the Index may now shape a pull-back at this juncture. The first short-term support to watch will be at 9950 and only a break below 9950 is likely to trigger a potential deeper pull-back to target the support at 9755(former swing high area of 11 April 2016 + ascending channel’s support from 08 April 2016 low).

However, a clearance above the 10130/150 pivotal resistance for today is likely to invalidate the pull-back scenario for a potential further direct rise towards the next resistance at 10400.

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