DAX 30 Technical Outlook: Overbought but Trading Above Long-term Hurdle
DAX 30 Technical Highlights
- DAX closed last week above long-term levels
- Extended near-term, due for a pullback
DAX closed last week above long-term levels
Last week, the DAX closed above several long-term thresholds. This doesn’t necessarily put it into the clear to trade materially higher, but it certainly dents the bearish case for now. To recap, the long-term levels being tracked, are the neckline of the head-and-shoulders pattern dating back to 2017, the 2011 trend-line, 200-day MA, and March low from last year.
Despite closing above the levels on Wednesday, it looked as though a shorter-term ‘RST’ (Reverse Symmetrical Triangle) pattern may end up pushing the DAX lower by Friday to close below the aforementioned levels, leaving it with a weekly candlestick reversal. However, that was clearly not the case. This may open the way up for a broader rally to continue, but that may be put on pause until we see some retracement of the recent leg higher.
The market is rolling over just a bit from the upper parallel of a channel dating back to the December low. Stay below 12029 and lower prices are anticipated down towards 11800 and the gap-fill from April 3 at 11754, below there the 200-day under 11700, then the lower parallel closer to 11600.
Another little push higher from here above last week’s high will bring into play the trend-line off the Jan 2018 record high level. The thinking is that the market is either already undergoing a pullback or will very soon with both overbought conditions and resistance levels in the area.
Risk/reward is generally skewed negatively for longs at this point and growing more favorable for traders looking to play for a retracement. Following a pullback longs may become attractive if price action is constructive during the corrective process.
DAX Daily Chart (pullback looking likely soon)
DAX Weekly Chart (Closed above resistance)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.