DAX at 24,000: Bullish Momentum vs. Overbought Risks – A Technical Playbook Amid Tariff Uncertainty

The DAX closed at 24,027.65 on May 26, 2025, marking a historic proximity to the 24,000 threshold while navigating a critical technical crossroads. With its RSI at 87.34—deeply overbought—the index faces a pivotal question: Can this rally sustain its upward trajectory amid geopolitical tariff risks, or will overextension trigger a correction? This article dissects the technical landscape, the dual-edged impact of the 90-day tariff pause, and actionable strategies for investors seeking to capitalize on this volatile environment.

The Technical Tightrope: Overbought but Unbroken

The DAX's RSI of 87.34 (as of May 26) signals extreme bullish momentum, far exceeding the 70 threshold that defines overbought conditions. Yet, this hasn't halted the rally, thanks to a bullish alignment of moving averages (5-, 10-, 20-, 50-, 100-, and 200-day SMAs) and a MACD reading of 878.10, both reinforcing the uptrend.

However, the RSI's extreme reading raises red flags. Historically, overbought conditions often precede pullbacks, even in strong trends. The Stochastic oscillator at 96.46 (also overbought) and the William's %R at -3.54 amplify this caution. Traders must balance the bullish narrative with disciplined risk management.

Geopolitical Tariff Risks: A Double-Edged Sword

The 90-day pause in global tariff hikes has injected optimism, lifting exporter-heavy sectors like automotive and machinery. Export-oriented DAX constituents—think Siemens, Volkswagen, and Adidas—are prime beneficiaries of stabilized trade flows. Meanwhile, tech stocks (SAP, Infineon) gain ground as supply chains normalize.

But the pause is temporary. Investors remain wary of a resumption of tariffs post-90 days, which could hit profit margins and demand. This creates a “buy the dip, sell the rally” dynamic. The DAX's near-term resistance at 24,150–24,200 now hinges on whether the tariff hiatus fosters lasting confidence or merely delays reckoning.

Strategic Plays: Bullish with a Safety Net

1. Selective Long Positions in Exporters and Tech
Target exporters with pricing power and tech firms with diversified supply chains. These sectors benefit from the tariff pause but also offer downside protection if risks materialize.

2. Stop-Loss Discipline at Key Support
Set stop-loss orders below 23,934—the 50-day SMA's current anchor—to contain losses if momentum falters. A breach here could trigger a deeper correction toward 23,500, the 200-day SMA.

3. Tactical Hedging with Options
Consider put options to protect long positions or covered calls on overbought stocks to capitalize on premium decay. The DAX's volatility (ATR at 207.64) supports such strategies.

The Bear's Caveat: When Overbought Becomes Overdue

While the ADX of 41.81 confirms a strong trend, the short-term ADX at 16.99 signals consolidation. A breakdown below 23,934 could shift momentum, with the 23,400 level—the start of the current uptrend—acting as a final line of defense.

Final Call: Bullish, but Prudent

The DAX's RSI over 80 is a warning, not a sell signal. The bullish trend remains intact, but investors must treat this rally as a marathon, not a sprint. Deploy 50% of capital now, with the rest reserved for dips below 23,900. Pair longs with collars or stop-losses to navigate the overbought minefield.

In this era of geopolitical uncertainty and technical extremes, patience and precision will separate winners from casualties. The DAX's proximity to 24,000 is a milestone—but its true test lies in how it handles the next chapter of tariff politics and technical reality.

Act decisively—but stay vigilant. The DAX's rally is real, but its sustainability demands respect for both momentum and risk.