DAX Consolidates, Forms a Continuation Pattern

The German index DAX30 was trading flattish on Tuesday and hovered around 12,365 EUR during the London session. Traders took the advantage from the recent strong rally, which brought the index levels lower on Monday. It appears, however, it might be ready to rise again.

The short-time consolidation resembles a flag pattern, which is a continuation pattern and implies we could see another leg higher if DAX breaks above this consolidation zone. The resistance is therefore around 12,380 EUR and, if broken, bulls could push the price up to 12,440 EUR. The main resistance is located near 12,480 EUR, where the medium-term bearish trend line is located. Should the index jump above this, the trend might switch back to bullish.

On the downside, support is at the lower trend line of the consolidation pattern, currently around 12,325 EUR, with the next horizontal area only a couple of points lower.

If bears are stronger today, their next target might be at the bullish trend line, which is located at 12,260 EUR and, while the index trades above, the short-term outlook seems bullish. Falling below this trend line would negate the current bullish potential and we might see a bigger correction below the psychological level of 12,000 EUR.

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