Breakout bounce or breakdown?Germany 40 CFDFOREXCOM:GER40FOREXcomLower energy prices, an ECB that's backing away from an aggressive tightening cycle, and signs investors may be rotating away from growthier parts of the equity market and back towards old economy indices such as the DAX helped lift prices to fresh record highs earlier this month. However, renewed tensions in the Strait of Hormuz have pushed energy prices higher again, reviving concerns about Europe's energy security and the inflation risks that previously worried the ECB. On the back of that development, the price has completed a three-candle evening star bearish reversal pattern, retracing back to the former breakout level at 25,447, the previous record high set in late May. Despite having bearish implications for directional risk, the proximity of price to this level leaves a clear area for traders to build trade setups around, depending on how price reacts. While the price action warns of downside risk, the oscillators still marginally favour longs over shorts. RSI (14) is trending higher and remains above the neutral 50 level, while MACD has staged a bullish crossover and remains in positive territory, albeit it has flattened out. Upside momentum has waned a little, but it hasn't reversed yet. If the price can hold above 25,447, longs could be established looking for a retracement back towards the record high at 25,923. If it fails to hold above 25,447, shorts could be considered initially targeting 25,180, another breakout zone from the high set on June 22. Beneath there, the 50-day simple moving average and the uptrend from the April low converge around 24,600, an area where the contract also found buying support during June. Given Tuesday’s bearish retracement was sparked by an escalation in geopolitical tensions between the US and Iran, developments in the Strait of Hormuz may help determine which setup to consider. Good luck! DS