The DAX 30 cash index traded higher yesterday, clearing the upper bound of the sideways range that’s been in place since April 7th. This, combined with the fact that the index is also trading within an upside channel since March 24th, paints a positive near-term picture.
That said, the index hit resistance at 11340 today and pulled back. Thus, we would stay careful of a possible retreat before the next leg north, perhaps for the price to challenge the 10810 barrier, which is the upper bound of the aforementioned range, or the lower end of the upside channel. The bulls may take charge from near these support areas and perhaps shoot for another test at 11340. If they manage to overcome the 11340 hurdle this time around, we may see them aiming for the 11715 zone, marked by the inside swing low of March 3rd, or the upper boundary of the channel.
Shifting attention to our short-term momentum studies, we see that the RSI topped within its above-70 zone and just dipped below 70, while the MACD, although above both its zero and trigger lines, shows signs of topping as well. Both indicators detect slowing upside speed and corroborate our view for a setback before the next positive leg.
On the downside, we would like to see a clear dip below 10610 before we abandon the bullish case. Such a move would take the index below the lower bound of the channel, and also back withing the pre-discussed sideways range. In order to lean more to the bearish side though, we would like to see a dip below the key support zone of 10165. This would confirm a forthcoming lower low on the daily chart and may pave the way towards the low of April 6th, at around 9640.
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