DAX is not only holding well below 13800 highs carved in February 2020, but has also held below the recent lower high around 13300 mark respectively. The indice had closed lower below the 13000 handle yesterday as bears prepare to be back in control soon.
DAX probable wave counts are as follows: The indice had dropped from 13800 highs in February through sub 8200 lows in March 2020. The drop could be clearly sub divided into 5 waves, making an impulse. It is labelled as a larger degree Wave (1) here.
Ideally, an impulse is followed by a corrective wave but towards the opposite direction. DAX has also managed to produce a counter trend rally A-B-C from sub 8200 through 13300 levels respectively. It has taken form of a zigzag and is labelled as Wave (2) of a similar degree.
If the above proposed wave counts are correct, DAX should be preparing for a Wave (3) drop towards sub 8200 levels and beyond, in the next several weeks. Also note that prices should stay below 13300 and broadly below 13800 mark going forward.
Intermediary support is seen around 12200 followed by strong support around 11600, while resistance should be strong around 13800 mark if DAX attempts a test. A break below 12200 would be encouraging to bears as they would accelerate further towards 11600 mark.
Traders might be willing to hold on to short positions initiated earlier with protective stops above 13800 and projected targets below 8000 mark over the next several weeks.
Technical Analysis Team
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