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

By Fawad RazaqzadaStock MarketsJul 03, 2020 06:20AM ET
www.investing.com/analysis/chart-of-the-day-dax-bulls-ready-for-breakout-towards-alltime-highs-200529660
Chart Of The Day: DAX Bulls Ready For Breakout Towards All-Time Highs
By Fawad Razaqzada   |  Jul 03, 2020 06:20AM ET
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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
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. 

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

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

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Comments (8)
UMA TRUMAN
UMA TRUMAN Jul 04, 2020 2:36PM ET
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Dax breakout point was clearly at 12650. It failed and down we go.
DESI HOME REMEDIES NATURAL HOME TIPS
DESI HOME REMEDIES NATURAL HOME TIPS Jul 04, 2020 2:36PM ET
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are you sure down trend begin
samay gupta
samay gupta Jul 04, 2020 12:51AM ET
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isn't it abc rise and massive downwave c is in making
Mein Ki
Mein Ki Jul 03, 2020 3:55PM ET
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remember INDZI? Mr. Writer? Why do you allow youself public expression based on FAKE statistics?
John Patrick
John Patrick Jul 03, 2020 1:25PM ET
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Breakouts based on what Fed Stimulus? I wouldn't call that a real break out. How about an article on US Auto Sales Plunged In Q2 With GM, Toyota, & Fiat Suffering 30% Drops In Sales??
Plopseven Schwartz
Plopseven Schwartz Jul 03, 2020 1:25PM ET
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These fools just want to spend more on stocks that are worth less. Let them throw away their money on unsound investments.
rr bonne
rr bonne Jul 03, 2020 1:21PM ET
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these price points of breakout and resistance really are just meaningless because anything could happen since economic stimulus. all rules and boundaries of changed. Any comparisons to mar/apr/may time frame will always be "records". everything is coming out of a free fall! comparing things to January 2020 is more of a comparison to "normal" than psychological or any levels now.
Luna Ley
Luna Ley Jul 03, 2020 12:08PM ET
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Great article!
PAKAWA pakawa
PAKAWA pakawa Jul 03, 2020 11:11AM ET
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MY OPINION!!! Glabal economies have entered a bear market for next 3->5 years. Would be surprised should DAX break 13800 which is highly not to happen. MACD on MONTHLY technicals confirm DAX is in bear market.
Alex Malmstrom
BrassTacks1 Jul 03, 2020 11:11AM ET
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I don't know what settings you use for the MACD, but with standard settings the MACD on the monthly time frame is close to turning bullish again.
PAKAWA pakawa
PAKAWA pakawa Jul 03, 2020 11:11AM ET
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Alex Malmstrom Hi. Thank You for your reply. Its a monthly chart so how about a response in January 2021? Thank You for your kind consideration.
Liveth TV
Liveth TV Jul 03, 2020 11:09AM ET
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