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DAX Outlook: Trend-line Supported, Pattern Continues to Develop

DAX Outlook: Trend-line Supported, Pattern Continues to Develop

What’s inside:

  • DAX looking to December trend-line for support
  • Three lines of resistance lie ahead for the market to get through if prior record high to be challenged
  • Day-by-day the rising wedge scenario continues to work closer towards becoming reality

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To start March, we described the DAX as springing to life after a thorough test of support, then just a couple of days later on Friday we said the German index is turning lower off a confluence of resistance. The first thought this sequence brings to mind – choppy trading conditions, and then secondly, given the angled support and resistance from the top and bottom-side, with just a little more time (maybe another week) we may see the ‘rising wedge’ scenario unfold we touched on briefly in prior posts.

For the pattern sequence to further itself towards reality we will need to see another hold and shove higher from the December trend-line; should this happen then we can begin taking it into serious consideration. The outcome of such a pattern could be a resolution to the upside, or identify a potential top. We’ll just need to see if the formation develops fully first, and then go with the break (react vs. predict).

The December trend-line is immediately in view, and is likely needed to hold if the short-term isn’t to turn negative. A successful hold and rally will bring the last week’s high of 12083 into play, then the pair of top-side trend-lines extending off of swing highs created in 2016; those lines currently lie in the 2110/160 vicinity. A break above those three levels of resistance paves a way for the record high of 12391. A break of the December trend-line is likely to result in a drop to the 2/24 swing low (11722) at the least, if not leading to a broader decline.

For now, we’re respecting support within the ongoing upward trend, but also keeping upside expectations in check until we see all lines of resistance overtaken.

Heads up: On Thursday, the ECB meets, and while no material changes are expected to current monetary policy the press conference with Draghi could bring volatility.

DAX: Daily

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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.