DAX might be ready to plunge lower towards 10160 initial support in the near term, as bears might be preparing to break below the counter trend line support. The indice had managed to carve a lower high around 13300 on July 21, 2020.
DAX has reversed lower since the 13300 highs and is seen to be trading around 12800 mark as we prepare to publish this update. A push below initial support around 12500 will confirm that the indice has carved a lower top at 13300 levels.
DAX probable wave counts are as follows: The earlier drop from sub 13800 through 8200 was in 5 waves, making an impulse drop. This is labelled as larger degree Wave (1). An impulse wave is normally followed by a corrective wave.
DAX had rallied from 8200 levels since March 23, through 13300 levels as a corrective zigzag, labelled as A-B-C, potential larger degree Wave (2). If the above counts hold well, DAX could be underway towards 8200 as Wave (3) unfolds.
Ideally, the indice should stay below 13300 levels going forward. Please note that major resistance remains around 13800 and DAX is bearish until prices stay below that mark. A break below the counter trend line support will accelerate the drop.
Most traders might have initiated fresh short positions around 13000/200 mark, with protective stop above 13800 levels and projected targets below 10150, 9000 and 8000 respectively. Only a break above 13800 would delay matters further.
Technical Analysis Team
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