dax weekly outlook 02 nov to 06 nov risk of pull back before potential upside movement resumes above

(Click to enlarge charts)

What happened last week

The German 30 Index (proxy for the DAX) has managed to inch higher to print a high of 10926 on 29 October 2015 before trading sideways.

Please click on this link for a review on our prior weekly outlook/strategy.

Key Economic Data Release/Events

• 02 Nov (Mon) – German Markit Manufacturing PMI for Oct @ 0855 GMT
• 04 Nov (Wed) – German Markit Services PMI for Oct @ 0855 GMT
• 05 Nov (Thurs) – European Commission Economic Growth Forecasts for EU
• 06 Nov (Fri) – German Industrial Production for Sep @0700 GMT

Key elements

• The pull-back support ( in orange) of the ascending channel bullish breakout stands at 10600 which also intersects the trendline support (in dark blue) joining the lows since 02 October 2015 low @8pm (see 4 hour chart).
• The neckline support of the “Double Bottom” bullish breakout is at 10480 with also confluences with a Fibonacci retracement cluster (see daily chart).
• The exit potential of the  “Double Bottom” bullish breakout stands at 11220 which also confluences with the trendline resistance linking the highs since 13 April 2015 and the 61.8% Fibonacci retracement of the steep down move from 13 April 2015 high to 24 August 2015 low (see daily chart).
• The 4 hour (short-term) Stochastic oscillator still has some room for further downside before reaching its extreme oversold level which suggests a potential pull-back in price action of the Index at this juncture (see 4 hour chart).
• Based on the Elliot Wave Principal, the Index appears to be undergoing a potential minor corrective (bearish) wave 4 in place since 29 October 2015 high @12am with key support zone at 10600/10480. Thereafter, the upside movement of the bullish wave 5/ is expected to occur to complete the medium-term impulsive bullish wave structure, labelled as (1) in place since 29 September 2015 low.

Key levels (1 to weeks)

Intermediate support: 10600

Pivot (key support): 10480

Resistance: 10926 & 11220

Next support: 10175

Conclusion

The Index now faces the risk of a pull-back towards the key support zone at 10600/10480 before another potential upside movement resumes to target the minor swing high at 10926 before the significant medium-term resistance at 11220.

However, a break below the 10480 weekly pivotal support may negate the bullish tone to trigger a deeper slide towards the next support at 10175.

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