Bottom line:  DAX bearish structure remains intact until prices stay below 13650. The indice had reversed sharply after printing a marginal high at 13640 levels on January 22, 2020.

Technical Analysis:

DAX remains in control of bears after reversing from 13640 levels, subsequently breaking below 13380 supports. It is trading close to 13200 levels for now and a break below 12875 could be next target for bears. Looking at the short term wave counts, the drop from 13640 through 13195 is seen in 3 waves until now. Also note that the fibonacci 61.8%retracement of the recent upswing is around 13200 levels. If we see a bullish reversal from here, DAX could be pushing towards fresh highs above the 13640 mark. Alternately, if the drop from 13640 unfolds into 5 waves, breaking below 12875/900 it would be confirmed that a meaningful top is in place. It is best to wait for price action to unfold itself before deciding the next trade. For those who had initiated aggressive shorts last week can take profits and remain flat for now. The larger wave structure reveals that DAX might be unfolding into a higher degree expanded flat. The drop from 13596 through 10279 had unfolded into an A-B-C/5-3-5 wave structure. Subsequent rally also produced an A-B-C structure, pushing prices to 13640 levels. It looks like an expanded flat in the making and a consistence break below 12875 would confirm. If the above counts are correct, DAX may continue to drop towards 10200 levels at least, to complete a 3-3-5 expanded flat wave structure here.  It is a safe trading strategy to sell o rallies, with protective stops above 13640 and potential targets below 10200 levels in the coming weeks and months. We would watch out for an impulse drop on lower time frame to confirm the above bearish reversal.

Prepared by

Harsh Japee, Technical Analyst.

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