DAX defends key support
27 February 2023
In the past few weeks, DAX has certainly been stronger than the American indices. On Friday, when American indices collapsed breaking major supports, DAX was trading relatively strong, still fighting on a crucial horizontal area. Monday brings a nice reversal and, may we say, right on time!
In February, DAX created a head and shoulders formation (yellow). This was not positive, but the sell signal was not triggered yet. Compare it, for example, to S&P 500, who managed to break the mid-term up trendline on Friday, effectively turning the sentiment negative. DAX is still trading above the neckline (purple) and above the long-term up-trendline (blue) that has been connecting higher lows since September 2022.
As long as we stay above the two supports (neckline and up-trendline), the sentiment remains positive and DAX has a high chance to set a new long-term high. The closest resistance is currently the black line connecting the top of the head with the right shoulder. The price breaking above the black line would be a nice buy signal and with today’s bounce, it looks like the base scenario for DAX.