Dax Bounces off a Crucial Support

If you’re currently long on stocks or indices you probably haven’t been sleeping well recently. This weekend could be different for you though. Major indices are currently fighting to end the week on a positive note. What’s important is it’s not happening in random places. For example, on the DAX, we’re currently bouncing off an absolutely key long-term horizontal support.

This week, the DAX was all about testing and bouncing off a crucial, long-term support on 12450 points (yellow). We established that level in March and it was tested for the first time at the beginning of July. This week brought us a third test and actually a third bounce. That shows us that the support can be considered a rock solid one, and creates an occasion for a great buy with a very desirable risk to reward ratio.

If you’re not convinced yet, then maybe wait for a breakout off the blue line first. The blue line is a mid-term down trendline and breaking it would be an anticipated confirmation, which would significantly increase the chances for a further rise.

We’re in a bear market, so naturally sentiment has to be negative. However, the fact that we’re bouncing off such a great support allows us to be positive in the short-term and that’s our current, short-term view on this German index.