Technical Analyst, Saxo Bank
Summary: DAX/GER40 and EuroStoxx50/EU are indicating top and reversal scenario of 2-4%. Uptrend could resume after this likely minor correction
DAX/GER40 cfd Thursday 14the December buyers opened the Index much higher but couldn’t keep it up when sellers took control selling throughout the session forming a Bearish Engulfing candle (not the best textbook example though and could look like a Belt hold Marabozu which is also a top and reversal pattern) but with a close below minor support at 16,760 strong indications of a top and reversal was in place.
Monday morning buyers are trying to lift the Index back above 16,760 but are likely to be failing currently trading below the lower rising trendline.
A correction seems likely to be unfolding. A correction that potentially could take DAX down to the 03.82 retracement at round 16,096.
RSI has been in extreme overbought territory above 80 not seen in decades
Support around 16,528-16,469.
There is no divergence on RSI despite the extreme values indicating DAX could resume its uptrend after a minor correction.
If DAX is closing above 17,003 it will demolish the correction scenario and the uptrend is resuming with potential to 17,254.
EuroStoxx50/EU50 cfd A couple of days with indecisive trading where buyers and sellers have been fighting it out the Index has formed a couple of Doji candles – open and closing price with in few cents of each other.
That could be a sign of a top and reversal. If we see a day with a bearish candle without the peak at 4,593 is taken out a correction is likely to be unfolding
The divergence on the RSI is indicating an exhaustion of the bullish trend adding to the top and reversal scenario being played out.
A close below minor support at 4,523 and below the lower rising trendline could fuel a sell-off down to around 4,384-4,363
A close above 4,593 and the uptrend will resume with a likely to 4,684
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