The German DAX cash index tumbled on Thursday, falling below the key support zone of 13215/75, defined by the lows of June 14th and May 10th, respectively. This confirmed a forthcoming lower low and combined with the fact that it is trading below the downside resistance line taken from the high of June 8th, keeps the near-term picture negative.
In our view, the dip below 13215 may now allow the bears to challenge the 12960 zone, marked by the low of March 9th, from where they may decide to take a break. This may allow a short-term bounce, but as long as it stays below the 13215 barrier, we would see decent chances for another leg south and a break below 12960. Such a move could carry larger bearish implications and may see scope for extensions towards the 12425 territory, defined as a support by the low of March 7th.
Shifting attention to our short-term oscillators, we see that the RSI fell back below its 30 line, while the MACD, albeit above its trigger line, runs well within its negative zone, and appears ready to fall back below the trigger. Both indicators suggest that the index has started to gain downside speed again, which adds to the notion of further declines in this index.
On the upside, we would like to see a clear break above 13675 before we abandon the bearish case. That barrier is marked by the high of June 16th, and thus, its break would confirm a forthcoming higher high. The index will also be well above the aforementioned downside line, and may initially challenge the 13875 zone, marked by the inside swing low of May 25th, at 13875. If they bulls don’t stop there, we could see them climbing to the 14120 zone, or even to the 14310 territory, marked by the inside swing low of June 1st.
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