Oscillators show a clear reversal in short-term momentum for the DAX as the RSI moves down out of ‘overbought’ territory and MACD goes below its signal line (see Chart 1).
These are the observations of Andy Dodd, Head of Technical Research at Louis Capital Markets, who says the DAX remains bullish medium-term having broken above the neckline of a continuation pattern on 15 October, giving a measured target of 13,755. However, Dodd points out there is often a re-test of the neckline in such patterns before the rally continues and this has not yet happened.
The weekly DAX future chart (Chart 2) shows a similar lack of upward momentum, leaving a Doji candlestick last week as a sign of indecision. The pattern on the long-term chart still leaves a measured target of 15,100 in play but, as with the daily chart, Dodd expects pullbacks to the neckline to provide buying opportunities.