Bottom line: DAX bearish structure remains intact until prices stay below 13596. Prices are seen to be testing channel resistance yet again before giving in to bears.
Technical Analysis:
DAX bulls managed to reach up to 13557 levels yesterday, which is a strong resistance zone. The indice has almost re-visited the 2 year high at 13596, forming a potential reversal zone around 13500/600 levels. The long term structure could be completing a 3-3 pattern or might have already completed at 13557. Please note that the drop between 13596 was seen in 3 waves A-B-C; which has be retraced almost 100% by a similar 3 waves pattern here. It remains possible that the entire structure could be unfolding as a 3-3-5 (flat) or a combination (W-X-Y). In either case, a sharp bearish reversal could be seen from current price levels at 13557 or after printing a shallow high above 13596 respectively. A minimum expectation could be towards 10200 levels, which was the December 2018 low. The entire cycle could take up to 12 months to complete, similar to the last waves. If the above wave counts hold well, DAX reversal is very close and the indice could reach 10200 levels by December 2020. An aggressive trading approach could be to remain short with protective stops above 13600, and potential targets towards 10200, going forward. A break below 12948, the immediate support, would confirm that a meaningful top is in place at 13557. A more conservative trading approach could be to remain flat for now and allow break below 12948. Thereafter look for opportunities to sell on a pullback rally, against the swing highs, targeting 10200 for long term and 12000 in the medium term. Also note that DAX is testing the channel resistance around 13530/50 levels and hence a bearish reversal remains high probability.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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