- The German 40 index hits a record high within bullish formation
- Might be sailing within overbought waters, but there is still some bullish power
Despite the disappointing manufacturing PMI data, the German 40 index (cash) managed to spike to a record high of 17,388 on Thursday, rising above the important resistance line which has been blocking the bulls during 2023.
The index has been resilient above its short-term simple moving averages (SMAs) over the past month, but with the price set to close comfortably above the upper Bollinger band and trading around the upper edge of a short-term bullish channel, a downside correction cannot be excluded. Still, the RSI and the stochastic oscillator have not confirmed overbought conditions yet, suggesting that the bulls might stay in play for a bit longer before the next bearish wave takes place.
On the upside, the 161.8% Fibonacci extension of the previous downleg at 17,410 is within breathing distance, while slightly higher, the ascending trendline from March 2023 at 17,590 could be another tough barrier. Surpassing the latter, the door could open for the 17,900-18,000 territory.
Alternatively, a negative reversal could initially halt near the 17,200 constraining zone. If the bears claim that region, the price could slide to stabilize around the channel’s lower band at 16,963 or near the 50-day SMA at 16,800. If selling tendencies intensify from there, the index may head down to meet July’s high of 16,530.
Overall, the German 40 index has restored its bullish trajectory, and only a drop below 16,960 would downgrade the outlook back to neutral.
