DAX defends the key support
22 February 2023
After yesterday's decline in American stock indices, a critical battle is currently taking place in Europe, particularly on the DAX, which is the focus of today's analysis. The DAX is currently at a key horizontal support level, and the mid-term situation of this pair depends on what happens next.
The DAX has been in an uptrend since September 2022. The beginning of 2023 was especially strong for this German index, with prices climbing almost every day. However, more recently, the momentum has decreased, and the price has formed a pennant (red) and a Head and Shoulders pattern, which is the latest development on the chart (yellow).
In theory, the H&S pattern could signal a reversal of the bullish trend and the start of a bearish trend. To confirm this, sellers need to break the neckline, which for the DAX is the 15250 level (purple). Today, sellers attempted to break this level, but the second half of the European session brought a strong bounce from this support level, indicating that it is being defended and is likely to hold.
As long as the price remains above the purple support area, we have a signal to buy. A daily closing price below the purple support would be an invitation to go short, but we would need to see more commitment from the short side of the market to confirm this.