DAX index technical analysis points to a temporary pullback


European stocks are having a great year, with key indices nearing their all-time high. The same trend is happening in Germany, the biggest economy in the region. The DAX index spiked to a high of €15,676, the highest point since February 9 of 2022. It has jumped by over 30% from its lowest point in 2023.

The main reasons for the strong DAX comeback are the same ones that I covered in my Stoxx 50 and CAC 40 articles that you can read here and here. For the DAX, the top-performing constituent companies are the likes of Infineon, Continental AG, Bayer, Fresenius, BMW, and Zalando. 

DAX index forecast (weekly) 

The weekly chart shows that the DAX index dropped to a low of €11,934 on September 26 of last year. It then formed a small inverted head and shoulders pattern whose neckline was at €13,788, which was the highest point on August 15 and February 10 of 2020. 

The index has now moved above this neckline and risen above the key resistance level at €14,627, the highest point on May 30th, 2022. It is supported by the 50-day and 200-day moving averages (MA). 

Further, the index is closing in on the resistance point at €16,341, the highest point in 2022 and its record high. Therefore, the index has more upside to go in the coming weeks as the bullish trend continues. If this happens, the next level to watch will be at €16,341.

DAX prediction (daily chart) 

DAX chart by TradingView

Moving to the daily chart, we see that the DAX index has continued to rise in the past few weeks. It recently flipped the resistance level at €14,627 into a support point. This was an important level since it was the highest point in December and May 2022.

Like the weekly chart, the index remains above the 50-day and 200-day moving averages. The two averages made a golden cross pattern on December 2. Recently, however, the Relative Strength Index (RSI) is forming a bearish divergence pattern while the index has formed a small rising wedge pattern. 

Therefore, there is a possibility that it will have a small pullback in the coming days as profit-taking sets in. If this happens, it will likely retest the key support level at €15,000 and then resume the bullish trend. The overall target for the German DAX is  €16,341, it’s all-time high.

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