Technical Analysis – GER30 index pauses despite bullish bias

Anthony Charalambous, XM Investment Research Desk

GER30 stock index bulls have consolidated around the 12661 (resistance-turned-support) level of July 4. The bulls tried to extend higher, but sellers reversed the price back down to 12,590, which is the 23.6% Fibonacci retracement of the up leg from 11,878 to 12,815.

Despite the sideways move, the short-term oscillators now lean towards an improving market. The RSI is reflecting a minor improvement in positive momentum as it has turned back up in bullish territory, looking to reclaim the 70 mark. Indeed, all simple moving averages (SMAs) are rising, while the MACD is starting to move back up towards its red trigger line.

If the bulls maintain the index above the 12,661 level, the price could stumble at the nearby Tenkan-sen line, ahead of testing the fresh fourteen-month high of 12,815. Breaching the peak, the 12,887 resistance – coming from July 27 of last year – could apply some pressure. Above this, the 12,970 level could deter the climb higher, which is the 176.4% Fibonacci extension of the down leg from 12,495 to 11,878.

Pushing below the 23.6% Fibo of 12,590, the 38.2% Fibo of 12,455 may come next, ahead of the swing low of 12,387, which is where the 50-period SMA also lies. Lower and below the 50.0% Fibo of 12,346 is the Ichimoku cloud merging with the 100- and 200-period SMAs around 12,300, which could prove harder to overcome.

Overall, above 12,815, the short-term bullish bias would be recharged, while below 12,233 it would return to a neutral status.