Technical Analysis – GER 40 index slumps to 2022 floor

The German 40 index (cash) unlocked an almost two-year low at 12,347, set on a pace to re-activate its 2022 downtrend below the 12,385 base, which kept the market in a horizontal move over the past six months.

At this phase, a rebound cannot be excluded as the falling RSI is within breathing distance from its previous lows and its 30 oversold level. The stochastics have already sunk below their 20 oversold number, but they keep trending southwards, warning that another bearish extension could develop before a potential upside reversal takes place. Likewise, the negative momentum in the MACD is foreseeing more losses ahead.

If the bears claim the 12,385 base, the sell-off could exacerbate towards the 12,000 psychological mark. A decisive close lower could then bring the 11,400 territory on the radar. Note that the 161.8% Fibonacci extension of the previous bullish correction is positioned within this area.

In the bullish scenario, where the index maintains a strong foothold at 12,385, some recovery could take place towards the 20-day simple moving average (SMA) and the nearby resistance area of 12,893. The 50-day SMA could be the next target at 13,180 and perhaps a prerequisite to retest the crucial long-term resistance trendline around 13,470. If buying interest intensifies above the previous high of 13,565 too, the door will open for the August peak of 13,792.

Summarizing, the German 40 index is vulnerable to more downside as the bears are pressing the 2022 support zone. A continuation lower could pin a new lower low around 12,000.

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