DAX Looks Heavy, Tests Broken Downtrend Line

The German DAX dropped again on Friday and was down 0.7 percent during the London session, hovering at around 11,240 EUR and testing the broken bearish trend line.

The first major support is now seen near 11,200 EUR, where the mentioned trend line is located. If the index drops back below, the trend could change back to bearish, targeting the current cycle lows at 11,050 EUR. If this level is also taken out, the long-term downtrend could be confirmed, possibly leading to a decline toward 10,400 EUR.

On the upside, if sentiment improves later today, we could see a rally toward this week’s highs at 11,400 EUR and furthermore, to the strong level near 11,600 EUR.

There is a bullish divergence on the daily chart between the RSI indicator and the price, which has failed to help until now and this RSI trend line may be tested soon. If its broken, the price could follow the indicator lower.

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