Dax 30 - potential breakout and the RSI

Dax30: has mostly traded in a range between 15000 and 15750 since April this year. The current breakout above this range should have a target of 16500 for the index, if this is not a false breakout / bull trap for traders. Read about a bull trap on the Claritech website here: https://www.claritech.app/post/bull-trap-what-is-it A range is also a good opportunity to look at Oscillators and the most widely known is the Relative Strength Index (RSI). Read about the RSI on the Claritech website here: https://www.claritech.app/post/relative-strength-index

The RSI is calculated using price movement in the lookback period. The objective of using it is to look for a divergence, like the one we are seeing in the daily chart of the DAX30 (Chart 1). While markets have been grinding higher, the RSI has made lower lows. This is usually a bearish divergence. A similar occurrence took place between Nov 2019 and Feb 2020 (Chart 2). A repeat of history? Or will the current rally continue to take the RSI up along with it?

Speaking of history, by June 2020 the correction and an initial bounce in the stock markets up was complete and I remember there was so much talk about the shape of the recovery – the letters L, V, W, M, N, O, U (even K and the Russian letter И) played very important roles in the conversation. Now with the benefit of hindsight (Chart 3), I think it was more of a “swoosh” recovery.