DAX Xetra (cash index)
The rally of the past few sessions continues to gains traction and is now up around a key crossroads in its development.
Is this going to be a sustainable recovery that continues well into next week?
The answer could come in how the market responds to the resistance band of the old June/August lows 12,104/12,120.
Yesterday’s attempt to breach this resistance was rebuffed and the market only ended with a rather drab positive session.
Another gap higher at the open today is testing this band of resistance again early today and if we see a close above 12,130 (yesterday’s high) then it would be a real signal of intent from the bulls.
- This would then decisively open the run higher as there is little significant resistance until 12,300/12,400.
Momentum indicators are certainly turning more positive, with the confirmed buy signal now on the Stochastics, RSI tracking higher above 40 and should there be a bull cross completed on the MACD lines it would be a real confirmation on the recovery.
The picture of the recovery to buy into weakness really comes through on the hourly chart.
A very well defined double bottom base pattern came with a move above 12,039 which has had an almost perfect pullback to the neckline of the breakout.
- This base implies 12,190 as a target, leaving good support around 12,039.
Hourly momentum indicators are also continuing to improve and suggest weakness is a chance to buy.