The DAX Recaptures Critical Levels, but Will It Hold?
- The DAX explodes higher out of range
- Recaptures critical 10,100 level, needs to hold above for further gains
- Pullback into support viewed as a good entry point
The DAX was stuck in a narrowing range below key resistance for much of the month until it broke higher on Monday, and then tacked on further gains to firmly assert itself above the 10k mark. The close yesterday well above 10,100 was an important one as this level has been in play on numerous occasions over the past 2+ months.
The level was etched firmly into the charts back in March when numerous rally attempts failed to close above 10,100, and then proved to be resistance on a bounce earlier this month. The reason this area has received so much attention is because of its weekly importance extending back to 2011 in the form of a trend-line passing through the vicinity.
The key question moving forward is can this former resistance now turn itself into support, or will the move above turn out to be short-lived? Presenting risk to further gains is the trend-line off the November 2015 peak, which this morning it is currently challenging. At this time, it is only perceived to be a trend-line of minor imprtance, with the trend-line off the April 2015 record highs holding much more significance. But we won’t need to worry about that for another few hundred points.
In the short-term, we will want to see how a rally can hold above 10,100 and any retest of this support level is viewed as a potential buying opportunity for an possible up towards the 4/21 peak below 10,500 and the record high 2015 trend-line. However, should the DAX sink back below 10,100/000 then we may have to shift our bias back to neutral to negative.
DAX (GER30) Daily
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at firstname.lastname@example.org
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.