The German DAX index has moved back towards the lower end of its trading range, meaning the 15,100 to 15,500 regions, after the recent blockbuster rally towards the 16,000-level faded out.
Huge moves in the bond market have kept stocks on the backfoot this week, as traders start to focus on what the rise in yields could mean for stocks, and also to a large degree the US dollar.
A large bullish pattern is starting to form on the lower time frames, which strongly suggest that the German DAX index may stage one final meaningful pullback, and then an explosive rally.
Looking at the pattern more closely, a large falling expanding wedge pattern has formed between the 15,200 to 16,000 level. These patterns are amongst the most explosive bullish reversal patterns out there.
Looking at sentiment data, retail traders are on the right side of the recent bounce back in the German DAX. The ActivTrader Market sentiment tool shows that GER30 traders are currently 60 percent bullish towards the index.
Based on historical data, retail traders tend to lean against the prevailing trend and have poor market timing. Therefore, we probably need to see negative sentiment rising in order for the bull run in the GER30 to continue.
GER30 Short-Term Technical Analysis
The four-hour time frame shows that the German DAX has formed a large, inverted head and shoulders pattern, and the neckline is currently located around the 15,900-resistance level.
According to the Ichimoku indicator the bullish short-term case is in play while the Ger30 trades above the 15,000 level. The 15,900 level remains the obvious bullish target if support holds.
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GER30 Medium-Term Technical Analysis
Looking at the daily time frame a large descending broadening wedge pattern has formed, which strongly suggest a bounce a huge rally could be coming for the German DAX.
This bullish reversal pattern suggests a final move toward the 15,060 level could be it for the German DAX before we finally see the index lifting off above the 16,000 level towards the 16,800 area.
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