DAX 40 Analysis: Strong Start to 2024, But Profit-Taking and Key Support Levels in Focus

The DAX 40 index kicked off the year with a strong rally, reaching a high of 22,885 before experiencing profit-taking in recent days. As of now, the index is trading around 22,361, approaching the 20-day moving average (20MA), which could serve as a key short-term support level.

Technical Outlook: Key Levels to Watch

• Near-Term Support: The 20-day moving average could act as an initial support zone, potentially leading to consolidation before a continuation of the uptrend.
• Bearish Scenario: A break below the 20MA could trigger a retracement towards the 50-day moving average (50MA) near 21,500, where the upper trendline of the rising wedge may provide stronger support.
• MACD Bearish Signal: The MACD is turning bearish, indicating potential downward momentum in the short term. A stabilisation and subsequent upward shift in the MACD would provide a more favorable buying opportunity.

Market Sentiment and Key Risks

Investor optimism surrounding Europe has been a driving force behind the DAX's strength. However, geopolitical uncertainty related to the Ukraine-Russia peace negotiations and potential tariffs from Donald Trump could introduce volatility. Traders should watch for policy developments and macroeconomic indicators that could impact market sentiment.

Conclusion

While the DAX 40 remains in an overall uptrend, short-term bearish momentum suggests caution. Monitoring key support levels, moving averages, and momentum indicators like the MACD will be crucial for identifying potential entry points. If bullish momentum resumes, the index could look to reclaim its recent highs, while a deeper retracement could offer longer-term buying opportunities.