DAX is holding its swing highs since June 08, 2020 around 12900 levels. Bulls had managed to rally towards 12840 levels yesterday before pulling back sharply. Even if the indice breaks above the 12900 interim resistance, the overall structure remains bearish against 13800.
Let us look at the medium term potential wave counts again. The indice had dropped from 13800 through sub 8000 mark sub dividing into 5 waves, which is marked as Wave (1) (not seen on the hourly chart here).
The subsequent rally from sub 8000 through 12900 level was corrective and could be labelled as an A-B-C, potential Wave (2) of the same degree. If the above counts are correct, Wave (3) has been unfolding since 12900 highs.
Going further into the lower degree wave counts, the drop between 12900 through 11600 was also in 5 waves at a lesser degree. This has been labelled as Wave 1 on the chart. As the general guideline suggests, DAX has rallied post 11600 lows in a corrective wave.
The rally from 11600 lows through 12784 highs yesterday is in 3 waves and looks like a zigzag 5-3-5 pattern. This has been labelled as Wave 2 on the chart. If the above lower degree wave counts are correct, DAX is heading for a sharp reversal towards 10600/700 levels.
Most traders might have already initiated fresh short positions around 12800 levels yesterday. The protective stop should ideally be placed above 13800 for now, with potential targets below 10600/700 levels at least.
Technical Analysis Team
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