The German DAX cash index edged north during the European morning, breaking above the key resistance zone of 11710. The index continues to trade above the upside support line drawn from the low of December 27, while since February 8, it has been supported by another, steeper, upside line. This, combined with the fact that the break above 11710 has confirmed a forthcoming higher high on both the 4-hour and daily charts, paints a positive near-term outlook.
We believe that the break above 11710 may have opened the path toward the peak of October 17, at around the 11850 level, where the price may stall for a while, or even retrace a bit lower. That said, as long as such a retreat stays limited above the upside line taken from the low of February 8, we would see a decent chance for the bulls to jump back into the action an push the index higher. If they prove strong enough to overcome the 11850 hurdle, then we may see them putting the psychological zone of 12000 on their radars, which is also defined by the highs of October 9 and 10.
Taking a look at our short-term oscillators, we see that the RSI rebounded from slightly above 50, and now shows signs of flattening near 70. The MACD lies above both its zero and trigger lines. These indicators detect upside speed, but the fact that the RSI has slowed down near 70 make us cautious of a possible setback, perhaps from current levels, or after the price hits the 11850 zone.
Nonetheless, in order to start examining whether the bulls have abandoned the battlefield, at least in the short run, we would like to see a clear dip below 11635. Such a move may also drive DAX below the upside line taken from the low of February 8 and could initially pave the way for the 11545 zone, near the low of March 14. Another dip, below 11545, could see scope for extensions toward the other upside line, drawn from the low of December 27, or the 11470 area, marked by the low of March 13.
