The German DAX index has moved back towards the 16,000-support level after the leading German index ran out of buying interest just short of the 16,100-resistance level last week.
Interestingly, the bullish news surrounding the approval of the new $1 trillion plus United States infrastructure bill failed to ignite the German DAX to a new all-time trading high in early-week trade.
Looking at the medium-term technicals, a breakout from a large falling expanding wedge pattern is underway while the price trades above the16,000 level. These patterns are amongst the most explosive bullish reversal patterns out there.
This means that the German DAX is dangerously bullish while trading above the 16,000, and the index could become a very difficult sell if the price starts to look rock-solid
Hope for bears still exists, as significant amount of negative price divergence has built during the recent rally. According to the Momentum indicator, the divergence extends towards the 15,500 area
Looking at sentiment data, retail traders are on the wrong side of the recent rally in the German DAX. The ActivTrader Market sentiment tool shows that GER30 traders are currently 76 percent bearish towards the index.
Retail traders tend to lean against the prevailing trend and have poor market timing. Therefore, rising bearish sentiment probably means the bull run in the GER30 will continue.
GER30 Short-Term Technical Analysis
The four-hour time frame shows that a bullish breakout above a large descending broadening wedge pattern has taken place which strongly suggest a bounce a huge rally could be coming for the German DAX.
This bullish reversal pattern suggests that price stabilization above the top of the broadening wedge pattern around the 15,900 level could start a powerful breakout rally towards 17,200 area.
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GER30 Medium-Term Technical Analysis
The daily time frame shows that the German DAX has formed a large, inverted head and shoulders pattern, and the neckline is currently located around the 15,000-resistance level. The pattern has a massive target of 3,500 points.
According to the Ichimoku indicator the bullish medium-term case is in play while the Ger30 trades above the 14,900 level. The 17,000 level remains the obvious bullish target if support holds.
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