Even though DAX was recovering this week from the losses incurred last week, still, it seems that the bulls are not as strong as they think they are. The index, at the time of this analysis, is testing the important 12100 resistance zone, which acted as a strong area of support back in June and August. At the same time, we can see that the bulls are struggling to overcome that barrier. Such activity is not adding confidence over the possibility for the German index to move higher in the near term. For now, we will remain somewhat bearish and await another possible wave of selling.
Overall, DAX is trading below its downwards moving trendline, taken from the peak of the 14th of June, which is still supporting the bearish case. Also, if the 12100 level continues to hold strong and the index won’t be able to close above it, this could be a good sign for the bears to stat jumping in and taking advantage of the higher price. This is where we could see a move back down towards the psychological 12000 area, a break of which, could set the stage for further declines. The next support line to keep an eye on could be seen near the 11890 hurdle, marked by the low of the 7th of September. If that doesn’t break the fall, keep a close eye on the 11700 barrier, which was near the lowest point of this year.
Alternatively, for us to start examining higher levels, at least for the short-run, we would need to see a break and a close above the 12300 level, marked by the low of the 31st of August. Further acceleration of the price could lead to a test of the 12400 obstacle, or even the aforementioned downside trendline, which could stall the German index at least for a while, until the bulls and the bears decide, who takes the driver’s seat from there.
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