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DAX & CAC Technical Outlook: Extended, Looking to Dips as Buying Opportunities

DAX & CAC Technical Outlook: Extended, Looking to Dips as Buying Opportunities

What’s inside:

  • DAX crosses above July swing-high, extended but has path towards new record levels
  • CAC also extended, trading between support and resistance; view dip as buying opportunity
  • From a tactical standpoint minor weakness appears most prudent approach for new entries

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When we last looked at the DAX on Monday, this is what we had to say: “The DAX is losing steam, but remains constructive within a channel as long as we don’t see a sharp break lower. A breakout above Friday’s high at 12646 will quickly bring in the July high at 12676.”

After seeing a modest intra-day rejection on Wednesday from around the July high, yesterday the market closed above the July threshold. The slow-motion rally continues, but given there isn’t any substantial resistance between here and the record high at 12951, our sights are set on a test at the least, and likely new record levels at some point in the not-too-distant future. Don’t expect it to happen in a straight line, but as long as we don’t see a strong ‘swoosh’ lower, the trend remains favorable for higher prices. Buying on dips is the preferred strategy. With that said, the first level to watch is the July high just breached cleanly yesterday – 12676. This level aligns with the trend-line off the August low. A break below won’t turn the picture bearish but we’ll want to wait for the DAX to stabilize again before reasserting a bullish stance.

DAX: Daily

The CAC remains in a bit of an extended state, with it not having had any kind of pullback or consolidation period to speak of in nearly a month. Looking to support on a decline, 5259 will come into play most immediately, then followed by 5231. Turning our focus higher, 5323 and 5339 are next up as resistance. The French index is currently caught between the two areas of support and resistance, making new positioning difficult at the moment. Overall, the preferred approach is from the long-side on minor weakness.

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CAC: Daily

---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.