Bottom line: DAX is preparing to drop below 8750 in the immediate short term as bears continue to stay in control. Prices are expected to remain below 13600 levels for now.
Technical Analysis:
DAX remains firmly under control of bears since 13600/700 highs print on February 18/19, 2020. In our indice special edition today, we have covered the US and European majors and highlighted the most probable wave counts, to expect in the short-medium term. The drop between 13600/700 through11625 was the first impulse labelled as Wave 1 here. Wave 2 was extremely shallow and terminated just around the 12200/300 mark before Wave 3 resumed lower. Until now, Wave 3 has managed to reach fibonacci 1.271 extension of Wave 1 around 9465 levels. The sub waves within Wave 3 are not labelled here but the 3rd of 3rd wave seems to have completed and a sharp pullback can be expected from here. As we write this article, DAX is already up over 2% and is seen to be trading around the 9500 mark. The corrective rally is expected to continue further towards 9860/70 levels as lower degree wave iv unfolds. Please note that wave iv rally could be sharp and might give an impression that the drop is complete at 9465. Instead, the recent rally might be seen as yet another opportunity to initiate fresh short positions around 9867/70 levels, as DAX prepares to resume lower towards 8700 levels going forward. As of now Wave 3 might be under progress and could terminate around the 8700 mark, before Wave 4 counter trend rally could resume. Please note that DAX might still have further room to drop after the higher degree Wave 4 completes. In short, traders might be more willing to sell on rallies towards 9860 levels, going forward.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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