Bottom line: DAX long term bearish structure remains intact until prices stay below the 13800 resistance. The indice seems to have carved a lower high around 12900 levels over the last week, as bears are back in control.

Fundamental Outlook:

DAX had inched higher towards 12900 levels before reversing sharply over the last week. The indice had closed lower by almost 6%, at 12000 mark on Friday. As risk aversion continued yesterday, the indice had print fresh lows at 11577, before pulling back. The reversal in risk sentiment over the last week, has been mainly attributed to a second wave of COVID-19 infections.

It remains a matter of time that Global Indices continue to sell off over the next several weeks as infections continue to rise as economies re-open, especially Asian Countries. The last 10 weeks sentiment has taken just a few trading sessions to reverse and might continue further.

Oil prices may get a boost over the extended period of supply cuts starting July. The cut would include close to 10 million barrel per day and could add further to Oil prices rising. Last week, WTI Crude had peaked through $40 before easing off o $37 (current price), while Brent Crude had risen through $43.40 before pulling back.

Technical Analysis:

DAX bears are back in control after printing highs at 12900 levels last week. The indice had dropped over 1200 points before recovering some lost ground yesterday. The trend might have reversed lower and ideally prices should remain below 12900 mark, going further.

DAX had earlier dropped from 13800 through 8000 levels as an impulse wave, hence the drop was incomplete. The subsequent rally has been corrective (A-B-C), and seems to have terminated around 12900 levels. Also note that the indice has found resistance just above fibonacci 0.786 retracement of earlier drop. Hence probabilities remain high for a bearish reversal from here on.

Traders might have initiated fresh short positions from 12900 levels, with a protective stop above 13800 mark and projected profits below 8000 mark. Only a break above 13800 would nullify the above bearish setup.

Prepared by

Harsh Japee, Technical Analyst.

DAX Chart

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