dax right above 10480380 support for a potential rebound 1827062016

Daily Outlook, Thursday 18 August 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has broken the short-term pivotal support at 10630 and invalidated our preferred bullish direct rise scenario. From its high of 10806 seen on Monday, 15 August, it has shaped a decline of 2.7% to yesterday low of 10514.

Since the medium-term uptrend that is in place from the 24 June 2016 low, the aforementioned decline of 2.7% remains within the 3.7% to 5.2% range of the previous pull-back decline/consolidation seen so far. Thus, we are not in favour of a medium-term (multi-week) corrective decline view at the moment (see details below).

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

Today key Germany/Eurozone economic data/releases as follow:

• Eurozone Core Consumer Price Index for Jul @0900GMT (0.9% y/y consensus)

Key elements

• Yesterday’s decline has managed to stall just above the lower boundary (support) of the medium-term ascending channel in place since 06 July 2016 at 10480. The ascending channel support of 10480 also confluences with the former medium-term swing high areas of 21 April/23 June 2016 that has been surpassed and now turns into a pull-back support (see daily & 4 hour charts).
• The former broken short-term ascending trendline from 03 August 2016 is now acting a pull-back resistance (depicted in dotted pink) at 10705 (see 1 hour chart).
• Below medium-term ascending channel support of 10480 rests another significant support of 10380 which is defined by the pull-back support of the former descending range top bullish breakout that has capped previous advances since 12 April 2015 high and also close to the 23.6% Fibonacci retracement of the on-going up move from 24 June 2016 low to Monday, 15 August 2016 high of 10806 (see daily chart).
• The daily (medium-term) RSI oscillator remains positive above its ascending support without any bearish divergence signal.
• The hourly (short-term) Stochastic oscillator has just exited from its overbought region which suggests the Index may shape a pull-back towards yesterday’s minor swing low area at 10530.
• The significant resistance remains at 10870/990 which is defined by the medium-term swing high areas of 07/30 December 2015 and a Fibonacci cluster follow by 11050 (the upper boundary of the medium-term bullish ascending channel in place since 06 July 2016 low & a potential 5^th wave target, 5/ of (1) based on the Elliot Wave Principal).

Key levels (1 to 3 days)

Intermediate support: 10530

Pivot (key support): 10480/380

Resistances: 10705, 10870/990 & 11050

Next support: 10090

Conclusion

The Index may see a dip first towards the intermediate support of 10530 with a maximum limit set at the 10480/380 pivotal support before a potential upleg materialises. A break above 10705 is likely to add impetus for a further potential rally to target the next resistance at 10870/990.

However, failure to hold above the 10480/380 pivotal support is likely to invalidate the medium-term uptrend in place since 24 June 2016 low and open up scope for a corrective decline towards the next support at 10090.

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