Bottom line: DAX bearish structure remains intact until prices stay below 13600 levels, probably carving a standard flat structure.
Technical Analysis:
DAX had reversed from the channel resistance around 13425 levels early last week, keeping the bearish potential intact. The subsequent rally could be seen as a retracement of the drop between 13425 through 13140 levels, and that a potential lower top could be in place at 13330 levels. If the immediate short term structure holds well, DAX will ideally remain below 13425 and proceed lower towards 12800 levels during the next few trading sessions. Looking at the long to medium term wave count and structure, DAX has managed to print an A-B-C (5-3-5) lower between 13596 and 10279 levels. Subsequently the rally between 10279 through 13425 also unfolded as an A-B-C, reversing from the channel resistance last week. The existing 3-3 wave structure could be followed by yet another 3 waves at least, bringing prices back to 10270 levels. It could also be a 5 wave structure, completing a standard flat around 10200 levels. In either case, a high probability trade direction from here is expected on the south side, against 13600, with potential targets seen around 10200 respectively. Alternately, even if DAX breaks above the 13600 resistance, the rally could be short lived and a potential bull trap that should be avoided. In the latter case, we would like to remain flat and wait for a bearish reversal to initiate short positions again. At the moment, the structure looks to be bearish and a break below 12875 levels remain highly probable. This could be the beginning of a medium term bearish reversal with bears in control the coming weeks and months. Watch out for a bearish reversal signal around current price (13300), and prices pushing lower towards 10200 levels subsequently.
Prepared by
Harsh Japee, Technical Analyst
DAX Chart
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