Bottom line: DAX long term structure continues to remain bearish against 13800 mark. The indice has further carved a lower high around 13300 and is expected to stay below that, going further. A break below 12200 will accelerate the drop further.
Fundamental Outlook:
DAX has remained almost flat, closing marginally lower around 12887 mark yesterday. SPX500 was an exception closing higher by +0.50% around 3384 levels. DAX, along with global indices might be taking its cues from the FOMC, ECB over the week. Also rising US-China tensions remain a major cause of concern for risk sentiment, going forward.
WTI Crude process are trading steady around $42.50/60 levels for now, as it awaits the OPEC meet scheduled for tomorrow. It remains to be seen if production cuts are further tapered from 7.7 million barrels per day, amidst rising COVID-19 infections across Europe again.
Gold prices eased off to $1862 last week but is gaining traction again as the metal trades above $2000 mark today. On the news front, Warren Buffets’ Berkshire Hathaway has surprisingly bought a gold mining company, Barrick Gold. Gold need to break below$1862 to confirm further downside.
Technical Analysis:
DAX might be preparing to turn lower towards sub 8000 levels from here. The indice remains in control of bears as it stays below the 13300 high carved on July 21, 2020. The bearish move should accelerate once prices break below 12200 levels. Looking lower from here against 13300 and 13800 levels.
DAX structure remains constructive for bears as the drop from 13800 through 8000 levels is an impulse wave. An impulse wave is ideally followed by a corrective wave as seen here. The rally from sub 8200 has been corrective until now and managed to reach 13300 mark.
Also note that fibonacci 0.88 retracement levels has been reached by the proposed corrective wave before reversing lower again. Ideally, DAX should stay below 13300 levels and continue lower towards sub 8000 mark in the next several weeks to come.
Most traders might be preparing to hold short positions taken earlier around 13100/200 levels, with protective stops above 13800 resistance and projected targets towards 8000 levels respectively. A break above 13300 would still keep the bearish structure intact.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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