• GER40 index rises vertically, unlocks 20,000 number
• Short-term bias is positive, but caution is necessary

 

The German 40 index surged into uncharted territory, finally breaking above the 20,000 number on Tuesday despite the Eurozone’s biggest economy facing a gloomy economic and political outlook.

After a strong rally, the index could face a pullback, especially as the RSI and the stochastic oscillator fluctuate near their overbought levels. Resistance may appear around 20,220, where the 161.8% Fibonacci extension of the October-November downfall lies. If positive momentum holds, the index could target the upper band of the short-term bullish channel seen near 20,600.

If traders take profits, pushing the index below 19,900, support could emerge near the previous high of 19,678, with further backup from the 20- and 50-day moving averages near 19,380. The tentative support line at 19,135 could also provide protection, postponing a slump toward 18,650.

In summary, the German 40 index is in festive mode, aiming to extend its record rally within the 20,000 area. Given the overbought signals, though, resistance could be around the corner at 20,220.