DAX seems to be preparing to reverse lower towards 11600 and 10000 levels subsequently. The indice has carved a lower high around 13300 over the last few trading sessions and has also broken the counter trend line support, entering into the sell zone.
DAX probable wave structure is as follows: The indice had dropped between 13800 through 8200 levels, sub-dividing into 5 waves. The impulse drop has been labelled as higher degree Wave (1) on the chart here. Ideally, an impulse is followed by a corrective wave.
The subsequent rally from 8200 through 13300 was corrective A-B-C, labelled as Wave (2) of a similar degree. Also note that the counter trend rally had reached up to fibonacci 0.88 levels before finding resistance again.
If the above proposed counts hold well, DAX should stay below 13300 and continue drifting lower towards 11600 initial support and 10000 respectively. Potential for Wave (3) remains below 8000 levels, going forward.
Alternately, a push beyond the 13300 mark also remains possible but DAX should stay below 13800 mark to keep the bearish structure intact. Either way, a drop below 12250 would confirm that a meaningful top is in place and that DAX is heading lower.
Traders might be preparing to initiate fresh short positions now, around 12920 levels, with protective stop above 13800 mark and projected targets below 11600, 10000 and 8200 respectively. Only a break above 13800 would change the bearish structure.
Technical Analysis Team
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