dax weekly outlook 30 nov to 04 dec continues to evolve within a potential bullish dynamic above 112

(Click to enlarge charts)

What happened last week

The German 30 Index (proxy for the DAX) has pull-backed towards the 11000/10880 intermediate support zone and staged the expected rally. In addition, the Index has also surpassed the 11220 intermediate resistance.

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

Key Economic Data Release/Events

• 30 Nov (Mon) – Germany CPI for Nov @1300GMT
• 01 Dec (Tues) – Germany Unemployment Rate & Markit Manufacturing PMI for Nov @0850GMT
• 02 Dec (Wed) – Eurozone Consumer Price Index & Producer Price Index for Nov @1000GMT
• 03 Dec (Thurs) – ECB Monetary Policy Decision @1245GMT & Press Conference @1330GMT

Key elements

• The Index has continued to push higher above its medium-term trendline support now at 10800 (in dark blue) that has been in place since 29 September 2015 low. It has now started to evolve within a steeper short-term bullish ascending channel (in orange) in place since 16 November 2015 low (see daily & 4 hour charts).
• The lower boundary (support) of the short-term ascending channel now stands at 11130 which also confluences with the former swing high area of 19 to 20 November 2015 and the 50% Fibonacci retracement from the most recent up move from 24 November 2015 low to 26 November 2015 high (see 4 hour chart).
• The significant medium-term resistance stands at 11670 which is defined by the swing high of 06 August 2015 before the steep sell-off towards the “Black Monday”, 24 August 2015 low, 76.4% Fibonacci retracement of the steep down move from its current all-time 13 April 2015 high to the 29 September 2015 low and a lower degree 1.236 Fibonacci projection of the up move from 16 November 2015 low to 20 November 2015 high projected from 24 November 2015 low (see daily & 4 hour charts).
• The daily (medium-term) RSI oscillator continues to hold above its support and still has some room left for further potential upside before reaching its extreme overbought level. This observation suggests the current up move is not yet “overstretched” where the Index faces a risk of a steeper pull-back in price action (see daily chart).

Key Levels (1 to 3 weeks)

Intermediate support: 11240

Pivot (key support): 11130

Resistance: 11540 & 11670

Next support: 10800 & 10520/380

Conclusion

Technical elements remain positive any potential pull-back in price action is likely to be held by the key 11240/11130 support zone before another potential rally materialises to target the next resistances at 11540 before 11670.

On the flipside, failure to hold above the 11130 weekly pivotal support may negate the bullish tone to see a decline to test the 10800 trendline support that has been joining the higher lows since 29 September 2015. Only a clear break below 10800 is likely to trigger a deeper fall towards the key pull-back support of the “Double Bottom” bullish breakout at 10520/380.

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