- DAX (DE30 on xStation5) has slipped into a downward move after it failed to break 13500 points
- A pullback could reach as much as 12893 points
- What’s next for the index when the pullback is ended?
The last week saw the DE30 declining nearly 3% on the back of overall deterioration of moods across the global equity markets. It was sparked by some doubts surrounding the US tax reform as well as the higher euro ex-change rate. At the time of writing the German index is trading at levels unseen since September when the European Central Bank prolonged its bond buying program well into 2018, the decision which decisively helped the index. Having said that, even though the latest pullback has already been quite deep, there are little odds that the DE30 will be able to come back above 13500 points for the time being, hence the ongoing correction could extend further.
By and large, the DE30 fulfilled our scenario which assumed that the price would bounce from 13500 points, therefore a deeper pullback could be in the offing. Taking into account a 5-wave structure depicted at the chart beneath one may predict that a drop could reach as much as 12000 points. Furthermore, a bearish engulfing pattern drawn at a weekly time frame appears to confirm that sellers could be keeping a lid on the market in the nearest future.
The German index signals that a deeper pullback seems to be likely. Source: xStation5
Seeking a possible support for buyers let’s take a look at a daily interval. The chart below illustrates that the local highs from May and June this year (in the vicinity of 12893 points) could be a tipping point, what’s more this level is also underpinned by a 38.2% retracement. However, one cannot forget that the ongoing impetus is powerful and therefore each rebound ought to be seen just like a corrective move.
The DE30 is nearing a key support area. Source: xStation5
Finally let’s take a closer look at an intraday time frame suggesting that bears have taken control on the market. The largest pullback has reached 80 points so far, however taking into account that the first impulse is coming to an end one needs to assume that another corrective move to the upside could exceed 80 points pushing the price even towards 13200 points.
The German index seems to be completing its first downward impulse, hence a more substantial increase might be possible. Source: xStation5