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DAX Tech Update: Momentum Brings Twin Peaks into Play

DAX Tech Update: Momentum Brings Twin Peaks into Play

What’s inside:

  • The DAX busts on through double-top neckline
  • Skews trade towards the twin peaks created in August and September
  • Bias upward in the short-run as long as the 10500 area holds

On Wednesday, we took a look at the double-top which formed back in August/September and considered the potential for the bounce unfolding this week only to be a retest of the neckline (old support turned new resistance). It was also noted we needed to see a turn lower in momentum, first, before considering it a valid retest. That wasn’t the case.

US markets got a shot in the arm following the outcome of the FOMC on Wednesday, and thus giving global risk appetite a boost into yesterday as well. That boost pushed the DAX clearly through the neckline and has taken all double-top considerations off the table, and, to the contrary, has increased the likelihood we see continue to see higher prices in the short-run.

The DAX sits perched not far below the double-top highs between 10780 and 10806 to be exact. A push to those levels is expected at the least in the near-term, even higher looks probable as long as the German index doesn’t find a slew of sellers off those peaks. That is to say, a shallow pullback or sideways price action at that juncture would suggest stocks are in demand and want to trade higher.

In the very near-term, pullbacks are viewed as potential buying opportunities up to around 10800 as long as support in the 10500 vicinity holds. This lines up with yesterday’s low at 10491. If the market is as strong as it has represented in recent trade, a decline that aggressive looks unlikely, but nevertheless that is our line-in-the-sand. A strong drop back below support and the low of yesterday’s ‘power’ day would be cause for pause on a bullish bias. If the DAX should trade up to the old peaks we will reexamine price action and go from there.

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---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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