DAX Turns Lower Off Confluence of Resistance
- DAX presses up against eyed confluence of resistance, turns lower
- Has support not far below by way of the December trend-line, recent swing low
- Rising wedge scenario could come into play with more time
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Following Wednesday’s surge, yesterday was a relatively nothing day for the DAX with its paltry range of about 40 points. The German index found itself the past two days pressed up against several levels/lines of resistance we’ve been eyeing.
From Wednesday’s piece, “In the immediate future, the 2/22 high of 12031, April ’16 trend-line, 12079 (level from 2015), and then just a shade higher the August ’16 trend-line are our biggest concerns. All of these technical events lie within closely proximity to one another.”
Even with moderate selling in the near-term, the trend will remain point higher as long as the DAX can maintain the December trend-line (which gained further importance over the course of three days of testing it, 2/24-2/28), and not decline below the most recent swing low of 11722 created on 2/24. As long as support holds, the trend holds and downside momentum will be contained.
With further upside pressure and a break above the trio of resistance levels, the DAX will have room to run towards another top-side trend-line running up off the 1/3 swing high, then to the 2015 record high of 12391, which depending on timing may coincide with the Jan trend-line.
If the DAX continues to bobble around, though, between the pair of 2016 top-side trend-lines and the December trend-line, then the rising wedge scenario we briefly touched on the other day could come into focus. The outcome of such a formation could resolve itself into a strong squeeze higher or result in a sell-off; that’s the nature of the pattern, it often portends a big move, but doesn’t necessarily provide signaling as to the direction until it breaks (although rising wedges tend to be bearish). More on that later…
All-in-all, the tone for global equities remains bullish, and so it is expected to be the case for the DAX until we see price action indicate otherwise.
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.