Bottom line:  DAX remains bearish until prices stay below 13596.89 highs print on January 24, 2018.

Technical Analysis:

DAX prints 13425 high yesterday, hitting channel resistance yet again. The overall structure still remains constructive for bears, until the 13596.89 resistance stays intact. We have also presented the RSI on Daily Chart view which is clearly indicating strong bearish divergence marked with an arrow. Prices are hitting fresh multi-month highs but RSI still hanging below the 70 mark. The overall structure since January 24, 2018 looks like a potential flat in the making, with 3 waves down, followed by a 3 wave higher. The drop from 13596 through 10279 has been marked as A-B-C drop, which is followed by an A-B-C rally through 13425 levels. Also please note that DAX is hitting the Elliott Channel resistance of the recent A-B-C rally and a potential bearish reversal should be close. A drop below 13255 levels would confirm that a top is in place and bears would remain in control going forward. Hence, a high probable trade direction from here is expected to be on the south side against 13600, with a potential target around 10250 levels respectively. Alternately, if prices break above 13600 levels, it would be marginal and a potential expanded flat could be unfolding. We shall look to stay aside in that case and wait for a bearish reversal to re-enter short positions. In case we witness a bearish reversal from current price (13400), a standard flat could be expected to unfold and drag prices lower towards the December 2018 lows around 10200. It is recommended to avoid getting into a bull trap and a more conservative trading strategy could be to wait for a break below 13255 support, before initiating short positions on pullbacks.

Prepared by

Harsh Japee, Technical Analyst

DAX Chart

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