dax maintain bullish bias above 10180160 support 1824192016

Daily Outlook, Tues 02 August 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has shaped a pull-back in price action from yesterday’s gapped up high of 10474 as market participants digest the results of the latest stress test on European banks conducted by the European Banking Authority that indicate that European banking sector as a whole has enough capital to survive a fresh round of financial crisis except for Italy’s Monte dei Paschi, UK’s Royal Bank of Scotland and Ireland’s Allied Irish Banks.

Key Eurozone and Germany economic data releases/events for today:

• Eurozone Producer Price Index for Jun @0900 GMT (0.4% m/m & -3.5% y/y consensus)

Key elements

• Late last week, the Germany 30 Index has staged a bullish breakout finally from its former “Expanding Wedge” range top (depicted in dotted purple) in place since 21 April 2016 high now turns pull-back support at 10180/160 (see 4 hour chart).
• The aforementioned  pull-back support of 10180/160 also confluences with the 23.6% Fibonacci retracement of the recent rally from 06 July 2016 low to yesterday high of 10474.
• The 4 hour Stochastic oscillator has started to reverse up with the oversold region and the shorter-term hourly Stochastic oscillator is now coming close to its extreme oversold level. These observations suggest that the downside momentum of yesterday’s pull-back in price action is waning which increases the probability of an upturn in price action.
• The key resistance to watch now stands at 10530/650 which is the significant zone as per mentioned in our medium-term weekly outlook/strategy published yesterday (click here for a recap).

Key levels (1 to 3 days)

Intermediate support: 10225

Pivot (key support): 10180/160

Resistances: 10530/650

Next support: 10060 (medium-term pivot)

Conclusion

Maintain bullish bias for push up towards significant resistance zone. Any potential pull-back is likely to be held by the intermediate support of 10225 with a maximum limit set at the 10180/160 daily short-term pivotal resistance before the potential push up materialises to target the 10530/650 resistance.

On the other hand, a break below the 10180/160 short-term pivotal support is likely to put the bulls on hold for another round of slide towards this week’s medium-term pivotal support set at 10060.

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