Bottom line:  DAX might have completed the proposed pullback rally around 10137 levels. Higher probabilities are now pointing towards a fresh low below 8200 levels.

Technical Analysis:

DAX might have completed its much awaited pullback rally at 10137 yesterday. We had been calling for a potential counter trend rally since last few trading sessions and that prices could reach up to 9800 mark before resuming lower again. Believe it or not, the current price action might be confirming a termination of Wave 4 rally just above 9800 levels. DAX has managed to test the fibonacci 0.382 retracement of previous drop, and a bearish reversal might be seen. Alternately, if bulls manage to remain in control we could witness 10700/800 levels, going forward. This is the 61.8% retracement of previous drop which could be seen before the drop continues. At the moment, DAX is testing resistance zone around 9800/10000 levels and higher probability remains for a bearish resumption. Most traders might be preparing to initiate short positions again, with a protective stop above 10200 levels and projected targets below 8000 mark. A drop below 8000 would mark a significant bottom and the indice is expected to bounce back sharply. Furthermore, a meaningful corrective rally over the next few weeks could be possible. It might be safe to exit long positions taken earlier and remain flat, allowing another low below 8000 mark. Looking at the medium term structure, DAX remains bearish until prices stay below 13800 resistance. Any rallies from current levels, would be corrective and remain well capped below the 13800 mark. Trading opportunities might be seen on both sides and traders might want to position according to their risk appetite. Watch out for a potential bearish reversal from 10137 highs/resistance as traders prepare to push lower below 8000 mark.

Prepared by

Harsh Japee, Technical Analyst.

DAX Chart

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