DAX slid yesterday, breaking below the upside support line drawn from the low of June 2nd. Then, it hit support slightly above the 12340 zone and rebounded. However, the recovery was stopped by the aforementioned line, which this time acted as a resistance, from where the bears stepped back into the action and pushed the index lower. Thus, bearing in mind that the price remains below the prior upside support line, we will hold a cautiously-bearish stance for now.
In order to get more confident with regards to further declines, we would like to see a decisive dip below 12340, a support defined by the inside swing highs of June 24th and 27th. Such a move may set the stage for extensions towards the 12205 zone, marked by the low of June 27th, the break of which may allow the bears to put the 12140 zone on their radars, which is a support defined by the inside swing high of June 17th.
Taking a look at our short-term oscillators, we see that the RSI turned down again and just touched its 30 line. It could fall below that line any time now. The MACD lies below both its zero and trigger lines and points somewhat down. Both indicators detect downside speed and support the notion for the index to continue trading lower for a while more.
In order to abandon the bearish case, we would like to see a strong recovery back above 12590. Something like that would also drive DAX back above the upside line drawn from the low of June 2nd and may initially aim for the 12662 area, which is the highest point since August 10th last year and is marked by the high of July 3rd this year. Another break, above 12662, would confirm a forthcoming higher high on the daily chart and could open the door towards the peak of August 7th, 2018, near the 12745 area.
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