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After the 9.4% drop seen in the Germany 30 CFD Index (a proxy for the DAX futures) from the 12 July 2024 high to the 5 August 2024 low, its price actions have recouped all its prior losses and revisited its current all-time high area at 18,930/18,994.
Since 3 September, it has faced a hurdle to clear above the 18.930/18,994 critical resistance zone, declined, and broke below its 20-day moving average on 6 September.
These observations suggest that the short-term uptrend and recovery phase from the 5 August low to the 3 September high is in jeopardy of reversing its course. Several elements hint at a potential bearish reversal scenario at this juncture.
The recent 2.3% rebound from its 10 September low of 18,186 has reached the 61.8% Fibonacci retracement of the prior decline from the 3 September high to the 10 September low, and confluences with 4/6 September swing highs that is acting as an intermediate resistance at 18,660.
The rebound mentioned above has taken the form of a potential “bearish flag” chart configuration pattern that implied a “dead cat bounce”.
The 4-hour Stochastic oscillator has almost reached an extreme overbought level of 99 where past price actions of the Index on several occasions saw a short to medium-term bearish reversal in price actions thereafter.
Fig 1: Germany 30 medium-term trend as of 13 Sep 2024 (Source: TradingView, click to enlarge chart)
The key medium-term pivotal resistance for the Germany 30 CFD Index stands at 18,660 which also coincides closely with the 20-day moving average that it has faced a challenge to reintegrate above it in the past four days.
A break below 18,390 (the lower boundary of the “bearish flag”) may trigger a potential fresh short to medium-term impulsive downmove sequence to expose the medium-term supports of 18,160 and 17,820 (also the 200-day moving average) (see Fig 1).
On the flip side, a clearance above 18,660 invalidates the bearish scenario for the next medium-term resistance to come in at 18,930/18,994 in the first step.
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