dax daily outlook wed 13 apr 2016 potential bearish reaction below key 9900 medium term resistance 1

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What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has squeezed higher in this minor corrective rebound phase and surpassed our expectation as it shot past the short-term pivotal resistance at 9780.

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

Today’s key economic data release will be as follow:

1)      EMU Industrial Production for Feb @0900GMT

Key elements

• Despite yesterday’s rally, the Index is still below the medium-term pivotal resistance at 9900 the upper limit of the risk zone of 9780 (previous range support) /9900 where the bulls may succumb to a bearish reaction 16590. (click here for more details in our latest weekly strategy/outlook).
• In the shorter-term, current price action of the Index is now hovering just below the upper boundary (resistance) of the ascending channel in place since 08 April 2016 low of 9442 which is just below the 9900 medium-term pivotal resistance.
• The 9900 medium pivotal resistance also now confluences closely with a Fibonacci cluster (61.8% retracement of the decline from 30 March 2016 high of 10099 to 08 April 2016 low + 1.00 projection from 12 April 2016 low of 9625).
• Momentum indicators have started to signs of exhaustion. Both the 4 and 1 hour Stochastic oscillators have reached their respective extreme overbought levels with a bearish divergence signal being flashed out on the hourly oscillator. These observations suggest a potential bearish reaction in price action at this juncture.
• The significant short-term support now rests at 9660 which is defined by the lower boundary of the ascending channel and the former minor swing highs area of 07/08 April 2016.

Key levels (1 to 3 days)

Pivot (key resistance): 9900 (weekly pivot)

Support: 9660

Next resistance: 10130

Conclusion

As long as the 9900 medium-term pivotal resistance is not surpassed, the Index still faces the risk of a bearish reaction towards the 9660 support in the first step.

On the other hand, a clear break above (daily close) the 9900 pivotal resistance is likely to invalidate the medium-term bearish scenario for a further rally to target the 23 March 2016 swing high area and the pull-back resistance of the “Ascending Wedge” bearish breakout at 10130.

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