Technical Analysis – GER 40 index shows signs of exhaustion

  • German 40 index takes a breather after dynamic rally

  • Selling pressures expected to intensify below 15,800

The German 40 index (cash) marked a three-week bullish streak, running from seven-month lows to a two-month high of 15,954.

The index has recouped more than half of the August-October downtrend, but the falling RSI, which seems to have topped in the overbought region in the four-chart, is warning that the latest downturn might be at an early stage. Note that the price could not overcome the 16,000 bar, which has been repeatedly blocking the way higher throughout the year.

Whether the bears will retake control might depend on the 15,800-15,840 region, which includes the 20-period simple moving average (SMA). If that floor cracks, the index could slide immediately towards the 15,700 constraining zone, while slightly lower, the 23.6% Fibonacci retracement of the latest upleg could halt steeper declines at 15,632. A break below the 50-period SMA and the tentative support trendline drawn from October’s low could be a bigger threat at 15,545.

In the opposite case, where the price successfully pierces through the former bar of 16,000 and exits the bullish channel on the upside, it may head towards the 16,145-16,200 restricted area. There might be another hurdle within the 16,280-16,335 territory, where the market peaked several times from November 2021 onwards.

To sum up, the latest downside correction in the German 40 index could face some continuity, as the latest bullish action seems overdone. The confirmation signal is expected to come below 15,800.

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