The German index had experienced heavy selling last Friday after a week of sideways action. Obviously, the week closed in the red and early today we saw further declines. But the bulls are really trying hard to keep DAX above its medium-term upside support line, taken from the low of the 26th of March. That said, the markets are looking weak right now, where the sentiment is negative. But could that line be enough to hold the index from dropping lower? For now, we will stay neutral, but keep a close eye on DAX, until we see some confirmation moves.
If the abovementioned upside line holds and DAX rebounds nicely back up, for us to get comfortable with the upside, we would need to see a strong move to and a close above the 12490 level. If something like that happens, we will start considering higher resistance areas like the 12745 level, marked by the high of the 7th of August. Further acceleration in the rate could lead to a test of the 12890 zone, which held the price strongly from moving higher on the 27th of July.
Alternatively, a break below the aforementioned upside support line could invite more bears to the table. We could then see DAX traveling towards the first good area of support at 12200, a break of which could open the door to a potential test of the 12100 zone, marked by the low of the 28th of June. If that zone is not able to stop the fall, this could lead to even bigger declines. The next strong support to watch out for could be around the 11770 hurdle, marked by the low of the 28th of March.
Both, the RSI and the MACD are in support of the downside. The RSI is below 50 line and pointing lower. The MACD is now below both its zero and trigger lines and is heading south as well.
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