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Technical Update - DAX & GER40 indicating uptrend exhaustion
Kim Cramer Larsson
Technical Analyst, Saxo Bank Group
The short-term uptrends in European Indices are stretched. DAX & GER40 cfd showing divergence indicating trend exhaustion
DAX showing RSI divergence (Divergence explained at the end) indicates an exhaustion of the trend. RSI has at the time of writing also broken below its rising trend line.
DAX uptrend is still intact however, until a close below 14,149 and a move to test the resistance at around 14,654 could still be seen
However, a test of the lower rising black trendline could indicate the trend is about to reverse.
If that scenario plays out, we could see a sell off in DAX down to strong support at 13,564 and the 0.382 retracement of the entire uptrend since September trough.
GER40 cfd/DAX future is showing identical picture. GER40 seems to be topping out just below the resistance area at 14,615-14,711. Reversal of the uptrend will be confirmed with a close below 14,122 but a break of the rising black trendline could be an indication of a trend reversal that could take GER40 down to support around 13,570.
RSI divergence: When price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
Author of the analysis is holding a short position in GER40
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