Technical Analysis – GER 30 index’s retracement forced sideways; positive picture under strain

Anthony Charalambous, XM Investment Research Desk

Germany 30 Index’s (Cash) bounce on the 11,588 level, that being the 61.8% Fibonacci retracement of the down leg from 13,826.27 to 7,961, appears to have hit a ceiling at the 76.4% Fibo of 12,444. The current sideways move is further backed by the recent bearish overlap of the improving 100-period SMA by the falling 50-period one, around 12,258.

Additionally, momentum indicators are highlighting the paused demeanour in the price as the MACD and the RSI remain stuck around their neutral marks. Nevertheless, the bigger picture remains skewed to the upside as long as price holds above 11,588.

To the upside, resistance could originate from the 76.4% Fibo at 12,444 before the price shoots for the fresh 12,931 peak achieved on June 9. Should the bulls conquer this top, the 13,160 barrier from February 25 may interrupt gains reaching the 13,572 hurdle and the all-time high of 13,826.27.

However, if sellers sink the index below the 100-period SMA and into the cloud, initial support could come from the bottom of the cloud and the nearby low of 11,991. Pushing underneath this, a critical fortified support level at the 11,588 trough could prove difficult to plunge past, as it happens to be the 61.8% Fibo and where the 200-period SMA currently resides. If this border is breached too, the 11,339 key inside swing high from April 30 could prevent the decline extending towards the 50.0% Fibo of 10,892.

Summarizing, the very short-term neutral-to-bullish picture looks fragile after the recent bearish crossover within the SMAs and only a break above 12,931 could resume the index’s ascent.