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Germany 30 Technical: A potential bearish reversal looms

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  • The recent rebound from its 10 September low of 18,186 has faced a hurdle to clear above its 20-day moving average.
  • Several key elements are advocating for a potential short to medium-term bearish reversal.
  • Watch the key resistance at 18,660.

After the 9.4% drop seen in the Germany 30 CFD Index (a proxy for the DAX futures) from the 12 July 2024 high to the 5 August 2024 low, its price actions have recouped all its prior losses and revisited its current all-time high area at 18,930/18,994.

Since 3 September, it has faced a hurdle to clear above the 18.930/18,994 critical resistance zone, declined, and broke below its 20-day moving average on 6 September.

These observations suggest that the short-term uptrend and recovery phase from the 5 August low to the 3 September high is in jeopardy of reversing its course. Several elements hint at a potential bearish reversal scenario at this juncture.

Bearish key elements

The recent 2.3% rebound from its 10 September low of 18,186 has reached the 61.8% Fibonacci retracement of the prior decline from the 3 September high to the 10 September low, and confluences with 4/6 September swing highs that is acting as an intermediate resistance at 18,660.

The rebound mentioned above has taken the form of a potential “bearish flag” chart configuration pattern that implied a “dead cat bounce”.

The 4-hour Stochastic oscillator has almost reached an extreme overbought level of 99 where past price actions of the Index on several occasions saw a short to medium-term bearish reversal in price actions thereafter.

18,660 and18,390 are the two key levels to watch

Fig 1: Germany 30 medium-term trend as of 13 Sep 2024 (Source: TradingView, click to enlarge chart)

The key medium-term pivotal resistance for the Germany 30 CFD Index stands at 18,660 which also coincides closely with the 20-day moving average that it has faced a challenge to reintegrate above it in the past four days.

A break below 18,390 (the lower boundary of the “bearish flag”) may trigger a potential fresh short to medium-term impulsive downmove sequence to expose the medium-term supports of 18,160 and 17,820 (also the 200-day moving average) (see Fig 1).

On the flip side, a clearance above 18,660 invalidates the bearish scenario for the next medium-term resistance to come in at 18,930/18,994 in the first step.

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Kelvin Wong

Kelvin Wong

Senior Market Analyst, OANDA at OANDA
Based in Singapore, Kelvin Wong is a well-established senior global macro strategist with over 15 years of experience trading and providing market research on foreign exchange, stock markets, and commodities.

Passionate about connecting the dots in the financial markets and sharing perspectives around trading and investment, Kelvin Wong is an expert in using a unique combination of fundamental and technical analyses, specializing in Elliott Wave and fund flow positioning, to pinpoint key reversal levels in the financial markets.

In addition, over the last ten years, Kelvin has conducted numerous market outlook and trading-related seminars, as well as technical analysis training courses, for thousands of retail traders.
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