After a 2.07% rally in prices last week, Dax futures fell below a key Fibonacci support at 15296. This zone provided resistance throughout January and holds major support today.
Despite the bullish momentum, technical headwinds are still limiting gains and suppressing the market. This could continue today as price action stalls around 15529.
1. Bulls fail to hold above 15500
After opening at a level of 15523, Dax prices fell quickly to test the support at 15500. Bulls failed to hold above this level and bears quickly reacted, driving price action lower.
Ahead of this, the daily CCI (commodity channel index) retraced from overbought territory. This is a technical headwind because it shows that buyers are struggling to sustain the momentum that helped drive prices higher last week.
Another technical headwind is the stalling of price action around 15529, which suggests that bears are taking control of this market and suppressing bullish momentum. This is a critical level to watch because if it is broken, then further losses could be in store.
It’s also worth noting that some analysts are warning of a possible bear market rally in the near future. Wells Fargo highlighted several key levels to look out for in its recent note.
3. Major support at 15296 holds
Major support at 15296 continues to hold as bulls fail to sustain gains above 15500. This is the technical indicator that indicates a correction may be in the cards, and if this level holds, prices could head lower to test Fibonacci support at 15157. This level is also the largest retracement of last week’s 2.07% bullish move, which helped to drive a larger-than-average bullish breakout earlier this month. A retest of this level, however, might not be the best way to see a return to long-term bullish strength. A stronger correction could see prices retrace even more of last week’s impressive move.
4. Price action stalls around 15529
After bulls failed to hold above 15500, price action stalled around 15529. This is a major technical headwind as it suppresses momentum. The stalling around this level suggests a strong retaliation from sellers, which could cause prices to fall further if they are not able to clear 15296 as support. This level has played a critical role in driving prices higher throughout January and is likely to remain an important resistance point moving forward.
As you can see, price action offers traders a clean and accurate view of the past, allowing them to make better trade decisions than using indicators with complicated functions.