dax daily outlook tues 25 aug snap back rally in progress above 9600 support 1116362015

(Click to enlarge charts)

What happened yesterday

The German 30 Index (proxy for the DAX) has tumbled again drastically and hit a low of 9320 (down by 25% from 12400 high seen in April 2015).

Interestingly, the Index has a daily close above the lower limit of the key long-term support at 9600 (for more details, please click on this link as per highlighted in our latest weekly outlook).

Key elements

• The Index has managed to register a daily close above the 9600 long-term key support which is defined by the 34-month Moving Average (in red) that is supporting the Index since January 2012 (see monthly chart).
• Yesterday’s price action has formed a daily “Long-legged” candlestick pattern above the 9600 key support which suggests that the bears are getting indecisive to push the Index lower (see daily chart).
• The intermediate term Stochastic oscillator has started to inch up from its extreme oversold level which suggests that upside momentum has resurfaced after a period of steep decline  seen last week (see daily chart).
• The intermediate resistance stands at the 10280/10440 zone which is defined by the pull-back resistance of the medium term descending channel breakout (in purple), the 38.2%/50%  Fibonacci retracement of the recent steep down move from 06 August 2015 high @8am to the current low of 24 August 2015 and trendline resistance (in pink) joining the highs since 11 August 2015 @8am  (see daily & 1 hour charts).
• The hourly Stochastic oscillator is coming close to its extreme overbought level which suggests the Index may see a retracement soon in the price action of the Index (see 1 hour chart)

Key levels

Pivot (key support): 9600

Resistance: 10180, 10280 & 10440

Next support: 9320

Conclusion

The Index may see a further push up towards 10180 follow by 10280 with a maximum limit set at 10440. Any potential pull-back in price action is likely to be held by the 9600 pivotal support.

However, failure to hold above the 9600 key pivotal support may negate the expected bullish tone to see a spike down to retest yesterday’s low at 9320.

Source:  Charts are from eSignal & City Index Advantage Trader

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