DAX Bounces Back: Support Holds the Line
24 December 2024
In today's technical analysis, we focus on indices, as the end of December typically marks the "Santa Rally" season—a time when indices often climb higher. However, the current situation suggests hesitation, with some indices like the DAX reaching monthly lows yesterday. This puts us in a curious spot, waiting to see whether the traditional late-December bullish sentiment will take hold.
Current Setup on the DAX:
The price is bouncing off a key horizontal support level, marked with green. Yesterday's daily candle showed a significant lower wick, indicating a rejection of lower levels. While the candle's body is slightly larger than ideal for a textbook hammer formation, the overall setup still looks promising. This bounce off the green support zone hints at a potential bullish wave, but confirmation is still needed.
Key Levels to Watch:
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Green Horizontal Support: The current bounce above this support level is critical. As long as the price holds here, the sentiment leans toward a bullish reversal.
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Red Uptrend Line: In the case of a bearish breakout below the green support, the next line of defense lies at the red uptrend line.
Scenarios to Monitor:
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Bullish Continuation: If the bounce from the green support continues and buyers gain momentum, this could mark the start of the anticipated Santa Rally, with prices pushing higher into year-end.
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Bearish Breakout: A failure to sustain above the green support, followed by a breakout below the red uptrend line, would signal a significant bearish reversal. This would serve as an excellent opportunity to go short.
Conclusion:
The current bounce off the green support is encouraging and may be a precursor to a bullish move if momentum builds. However, vigilance is key, as a breakout below the red uptrend line would flip the sentiment to decisively bearish. For now, patience is essential as we await confirmation of the next directional move.