Bottom line:  DAX remains bearish, until prices stay below 13600 levels going forward.

Technical Analysis:

DAX high potential trade direction should be lower towards 12000 and further, as we move into Q1 2020. For the above to hold, prices should ideally stay below 13600 resistance, and also break below 12880 levels, going forward. The overall wave structure since 13596 highs in January 2018 has unfolded as a 3-3 until now. The initial drop between 13596 and 10279 was in 3 waves A-B-C, followed by a 3 wave rally from 10279 through 13425 respectively. Ideally a 3-3 structure should be followed by either another 3 waves or possibly 5 waves towards the initial trade direction which is lower in this case. A 3 wave drop could be seen as a combination W-X-Y, while a 5 wave drop could be seen as a standard flat corrective wave. In either case, high probable trade direction is towards at least 10200 levels, if not further. Hence, a high probable trade direction from here Is expected to be on the south side, against 13600, with potential targets towards 10200 levels, as we push through Q1 in 2020. Alternately, a push above the 13600 mark could be short lived and a potential bull trap which should be avoided. We would wait for a bearish reversal to re-enter short positions, in case the alternate count unfolds. Looking at the short term wave structure, DAX might have carved a lower high below 13425, and should be preparing for a push 12880 levels, to confirm a meaningful top in place. The above price action could be seen as a medium term price reversal and expect bears to remain in control until 10200 levels going forward. Watch out for a bearish turn around current price (13300), as markets open tomorrow.

Prepared by

Harsh Japee, Technical Analyst

DAX Chart

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