🥇 First rule of investing? Know when to save! Up to 55% off InvestingPro before BLACK FRIDAYCLAIM SALE

Chart Of The Day: DAX Bulls Ready For Breakout Towards All-Time Highs

Published 03/07/2020, 08:09 pm
Updated 11/03/2024, 10:10 pm
DE40
-
DE30
-
STOXX
-

It has been a good few days for risk and as another week draws to a close, the major stock indices are looking quite bullish, despite ongoing concerns over the coronavirus situation in the US. Sentiment remains supported by several factors, not least improving global economic data, as lockdown measures ease across most parts of the world.

Indeed, the strong showing in US employment was the trigger behind Thursday’s rally. Today, we’ve learnt that China’s services activity expanded at its fastest pace in over a decade last month, according to the sector’s PMI. Activity within the European services industry also topped expectations, with Spanish flash PMI unexpectedly rising above the boom/bust level of 50, while the French, German and Eurozone PMIs were all revised higher. 

However, with the US markets closed in observance of Independence Day, it may be a quieter-than-usual session. Still, the major European equity indices look quite strong and the latest Chinese and European services PMI data could provide fuel for the rally to continue, even without the participation of US investors. 

Meanwhile from a technical point of view, the German DAX looks rather constructive, compared to some of its European counterparts, as it closes in on this year's record highs. 

Daily DAX Technicals

 The chart of the DAX futures shows a clear breakout on the daily time frame after the recent consolidation was resolved on Thursday, by the index moving above its resistance, rather than the support, trend line. Meanwhile, the 21-day exponential moving average has also crossed above the 200-day simple MA, which is an objective way of confirming the bullish trend. 

Now, the point of origin of the breakout is at 12385/90 on the daily time frame. This level needs to hold for the bulls to sustain control of price action. While above here, any short-term retracements should not worry the bulls on Friday or early next week. 

However, a move back below 12385/90 would put the bulls in a spot of bother, as this would provide an early indication that the breakout may have failed. And the buyers would be in real trouble if the recent low prior to the latest rally, breaks. That low comes in at 11925. If the index were to move below here, it would also see the longer-term bullish trend line break. So, needless to say, that would be a bearish development, if it materialized.  

But for now, the path of least resistance is to the upside. As such, I expect the dips to be supported and resistances to continue giving way.  Talking about resistance, one hurdle that was being tested at the time of writing was at 12590. If and when we cleanly break above this, then the recent high at 12933 will come into focus next, above which there is nothing too significant until the pre-lockdown, and all-time, high at 13824. 

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.