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Is an overstretched DAX setting up for profit-taking?


DAX Xetra (cash index)

A breakout on the DAX above 11,865 is a real sign of intent from the bulls.

It completes a big base pattern and opens for continued recovery I the coming months and opens the next resistance at 12,458.

However, this is a run that is at increasing risk of consolidation or even near term correction now.

  • There is a gap open at 11,777 whilst the momentum indicators are beginning to look stretched again.

The RSI is bumping up against 70, an area where the February and March rallies hit the skids and given today’s mild slip back, there is a risk that some near term profit-taking could set in.

  • An unwind back into the 11,725/11,865 long term pivot band (which is now supportive) would be a chance to renew upside potential and buy again.

The hourly chart shows the strength of the run higher, whilst also how stretched the near term picture has become.

  • There is a band of breakout support 11,777/11,824, whilst a reaction low at 11,890 from yesterday’s session could be an initial support to watch for a corrective slip developing.

Broadly the outlook for the DAX is now far stronger than it has been for several months and weakness into support should be seen as a chance to buy.

 


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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.