The German Dax Technical Analysis

The German DAX index has concluded Thursday's session by breaking through the daily fractal resistance level at $19,047. This resistance had been a barrier for a bullish continuation pattern, specifically a cup and handle formation. With this breakthrough, traders are eyeing default targets projected at $19,670, which represents an approximate increase of 3.24% above the recent resistance level.

Despite the promising targets for the pattern around the $19,700 mark, it is crucial to note that the DAX is trading within a zone that may experience downward pressure. This area corresponds to the 127%/141% Fibonacci extension of the previous upward movement, supported by the weekly fractal support established at $18,188. This extension from the initial upward move could exert significant pressure on the European barometer, potentially forcing a pullback towards the neckline of the cup and handle pattern, back to $19,000 mark.

Interestingly, this potential pullback in the index could be quite beneficial for traders. It will be important to monitor how the index reacts to the previous fractal resistance. This fractal, now broken, could serve as a support level in the future, facilitating a more substantial upward move in the index. A bounce off this level could not only push the DAX toward our default target of $19,670, but also provide the momentum to rally even higher.

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Traders should keep a close eye on the following key points:

1. Fibonacci Extensions: The 127%/141% Fibonacci extension marks a critical area that could indicate the strength of the current bullish trend. A rejection here could signal a deeper pullback.

2. Fractal Resistance and Support Levels: Watch the reaction at $19,047, which could become a support level if the index pulls back towards the neckline at $19,000.

3. Cup and Handle Pattern: The integrity of the cup and handle formation will be vital. If the price can maintain above the neckline, it could enhance bullish sentiment.

While the DAX has shown strong bullish potential by breaking key resistance levels, the presence of downward pressure in the current trading zone warrants caution. A pullback could provide an excellent buying opportunity, particularly if the index bounces off significant support levels. Traders should remain vigilant and adapt their strategies based on market movements, keeping the established targets in sight while being mindful of potential fluctuations.

Happy Trading,
André Cardoso