Bottom line:  DAX bearish setup remains intact until price stays below 13640 levels going forward. The indice could be preparing for a pullback rally soon.

Technical Analysis:

DAX is firmly in control of bears since we discussed the probability of a bearish reversal high after 13640 high was print on January 22, 2020. Looking at the immediate wave structure, DAX is near to completing its 5 wave drop from 13640. The counts are indicating that yet another low below 12973 could be required to complete an impulse. Trading point of view, it is better to take profits on short positions taken earlier and expect a pullback rally to materialize. Aggressive trading strategy is to allow another low below 12973 to initiate long positions with protective stops just below the low and potential target towards 13300/400. Please note that the recent drop could be the beginning of a new bear trend or a part of more complex corrective wave 4. In either case, a pullback rally is expected from near levels before DAX would decide further direction. The overall wave structure has been a 3 wave drop followed by a 3 wave rally between January 2018 and January 2020 respectively. The drop from 13596 through 10279 was in an A-B-C; which was followed by another A-B-C rally pushing towards 13640 levels respectively. If the above counts are correct, there could be a swift reversal from here and prices could drop up to 10200 levels to complete an expanded flat. Be prepared for a 3 wave corrective rally pushing prices at least towards 13300/400 levels before reversing lower again. It would be interesting to see how price action behaves around the projected targets. For now, a high probability counter trend rally could be in the making from around 12950 levels.

Prepared by

Harsh Japee, Technical Analyst.

DAX Chart

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