A key battle is currently taking place on the DAX index, notably without the influence of British and American traders due to market closures. The sentiment on the German index is much more positive compared to its American counterparts. Currently, the DAX is attempting to break out of a wedge pattern marked by orange lines. Early in the European session, the DAX is showing signs of breaking to the upside from this wedge.
This potential breakout began with a significant hammer candle on the daily chart, marked in green. This hammer bounced off the 23.6% Fibonacci retracement level and the lower line of the wedge, often indicating a reversal. The hammer also featured an intraday false bearish breakout, a common characteristic of such patterns. Since the appearance of this hammer, the DAX has initiated a new upswing.
The critical question is whether this upswing will continue, and today's trading session is likely to provide the answer. If the price closes above the upper line of the wedge, it will confirm a buy signal. Conversely, if the price bounces off the upper line, it would be a negative indicator. However, a definitive sell signal would only be generated if the price closes below the lower orange line.