dax risk of a minor pull back before potential new rise 1821162016

Daily Outlook, Wed 13 July 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has inched up as expected from the predefined intermediate support of 9770 and printed a high of 10015 (1.6% away from the target/resistance of 10180).

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

Key elements

• After yesterday’s rally of 1.8%, current price action has reintegrated back below the upper boundary (resistance) of the short-term ascending channel (depicted in brown) in place since 24 June 2016 low (Brexit). This observation represents a potential short-term mean reversion in price action as the yesterday’s rally gets “overstretched”.
• The hourly Stochastic oscillator has started to inch downwards and still has room to manoeuvre to the downside before reaching an extreme oversold level.
• The median line of the aforementioned ascending channel rests at 9750 which is slightly below the former minor swing high areas of 01 July/04 July 2016 at 9810. The 9810/750 support zone also confluences with the 23.6%/38.2% of the recent rally from 08 July 2016 low to yesterday’s high of 10015.
• Based on the Elliot Wave Principal and fractal analysis, the Index is now likely to be undergoing an intermediate degree corrective wave 4/ from yesterday’s high of 10015 (wave 3/) with an expected end target set at the 9810/9660 zone.

Key levels (1 to 3 days)

Intermediate support: 9810/750

Pivot (key support): 9660

Resistance: 10180

Next support: 9370

Conclusion

The Index may see a pull-back first towards 9810/750 intermediate support with a maximum limit set at the 9660 daily short-term pivotal support before a new upleg occurs to target the “Expanding Wedge” resistance at 10180 in the first step.

However, a break below the 9660 short-term pivotal support may jeopardised the preferred bullish scenario for a deeper slide towards the ascending channel’s support at 9370.

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