dax weekly outlook for 26 jan to 30 jan risk of a short term decline below 1074010775 before new pot

What happened last week

The German 30 Index (proxy for the DAX) has managed to soar to a new all time high and hit our target at 10580 as expected. Please click on this link for more details on our previous write-up.

Key elements

• The upper boundary of the long-term ascending channel (in orange) in place since September 2011 stands at 10960/11000 (see weekly chart).
• The long-term RSI oscillator remains bullish since the break of its former trendline resistance and 50% level (see weekly chart).
• The intermediate term RSI oscillator is coming close to its “extreme” overbought level which suggests limited upside potential.
• Current price action is coming close to the upper boundary of a shorter-term ascending channel (in light blue) in place since 16 October 2014 low now at 10740/10775 (see 4 hour chart).
• The 10220 and 10040/9940 support levels corresponds closely with the 38.2%/50% Fibonacci retracement from 06 January 2015 low to 23 January 2015 high (see daily chart).
• The 20-day Moving Average is also coming to support at the 10040/9940 region (see daily chart).
• The short-term Stochastic oscillator has dipped into the oversold region which suggests a potential “final” push up (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate support: 10220

Pivot (key support): 10040/9940

Resistance: 10740/10775 & 10960/11000

Next support: 9600/9400

Conclusion

Elements advocate for a potential “final” push up towards 10740/10755 before a potential short-term decline materializes towards the intermediate support at 10220. As long as the weekly pivotal support at 10040/9940 holds, the Index may see the start of another upside movement to target the significant resistance at 10960/11000.

On the other hand, a break below 10040/9940 is likely to damage the multi-month bullish trend in place since 16 October 2014 low for a deeper decline towards the next support at 9600/9400.

Disclaimer

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