According to trading rules that dominate trading within the price channels, we know that reaching the support line of the channel designates potential upside wave towards its resistance line. In March, 2009, the index has touched the support line of the channel which organizes the short term upside direction. After recording 7622, the index has started a bearish correction that sent it towards 61.8% Fibonacci retracement of the entire upside rally from 3587.00 to 7622.00 where it met the support of the medium term upside channel that assisted it to bounce upwards to resume the bullishness over medium and long term basis.
SMA 50 represents the resistance seen as a technical obstacle; thus, DAX should penetrate this level at 6173.00 in order to clear the path for more bullishness.
Consequently, we need to witness additional positive technical factors that may assist it to clear the aforesaid resistance level. The weekly chart offers those required positive facts as seen on our chart.
The above provided graph shows that the short term trading is controlled by another ascending channel, indicating that the index is on its way to visit 6720.00- the soft technical objective of this channel-.
Having a deeper look at the chart, we can notice the potential bullish pattern with a neckline at 6440.00 which should be clearly breached to open the door for additional upside movements towards 7600.00, followed by the complete technical target at 7900.00.
Stochastic supports our constructive technical overview over weekly and monthly charts and it represents a very positive motive suggesting that the positivity will be seen in 2012.
Ultimately, we shouldn't ignore the activation point for the scenario and also its invalidation level as follows:
- The bullishness will be activated once 6440.00 levels are taken with a weekly closing.
- The invalidation: Breaching through 5137.00 with a monthly closing will change the direction and will take the index towards 3577.00 which is very sensitive point over long term basis.