If the DAX can hold current support levels before breaking to new cycle highs, it could reaffirm the strength of its bullish channel.

The DAX has seen some large swings around the 200-day eMA, although a decent trend structure is emerging within a bullish channel on the daily chart. Prices are consolidating near 6-month highs after gapping above the September lows, and the consolidation has found support around the 8-day eMA and structural levels. Moreover, the 8 and 21-day eMA’s are pointing higher and fanning out to show bullish momentum is picking up.

Chart

For a more convincing momentum breakout, we’d prefer to see prices hold above immediate support and break above 12,030 to assume trend continuation. If a deeper retracement is to materialise, we’d look for the 11,750 region to hold before waiting for bullish momentum to return (as this is where the 38.2% Fibonacci retracement and lower-gap reside, making it a relatively healthy correction level).

A break below the 11,750 region puts it onto the backburner until the trend becomes clearer. Also, take note that the 200-day eMA and lower channel could provide likely support levels, which makes short trades on the daily timeframe less desirable, in terms of reward/risk potential.

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