DAX Analysis May 2015 (W,M)
Created on Friday, 01 May 2015 23:20
Written by Austin Galt
The German stock index, the DAX, has been trading as expected and looks to have put in its final high at 12390. We’ve been concentrating on the daily chart in recent times so now let’s zoom out a little with the weekly and monthly charts.
DAX WEEKLY CHART
We can see a 5 point broadening top in place denoted by the numbers 1 to 5. The move up into the wave 5 high was parabolic in nature which is typical behaviour found at major highs.
The Bollinger Bands show price has moved away from the upper band and is now around the middle band. After a bit more work around the middle band price should make its way to the lower band. That’s how I see it anyway.
The PSAR indicator now has a bearish bias after price finally busted the dots on the downside.
The Stochastic and MACD indicators are both trending down and looking bearish.
Let’s move on to the monthly chart.
DAX MONTHLY CHART
The RSI and Stochastic indicators both show a bearish divergence at the recent high while the latter has just made a bearish crossover.
The MACD indicator shows the averages have diverged quite a lot and price coming back down will fix that.
The Momentum indicator shows a sixth bearish divergence at the recent high. That generally means the game is up.
The Bollinger Bands show the parabolic move that has been in force the last few months with the upper band struggling to contain the move. The last two months price has traded well above the upper band and the move now looks done in my opinion. Game over.
I have drawn a Fibonacci Fan from the 2009 low to 2011 high and the recent high was right at resistance from the 23.6% angle. This parabolic move started with a false break of the 50% angle back in October 2014 and since then price has rocketed straight up to the 23.6% angle. Impressive stuff!
So, now that I believe the final bull market high to be in place, where do I expect the bear trend to end?
The upper horizontal line denotes the 2011 high at 7600 and while this level may provide temporary support I expect the final low to push on below this level. The lower horizontal line denoted the 2012 low at 5914 and I doubt price will trade below this level. Therefore, I favour the final bear market low to be below the 2011 high and above the 2012 low.
I have added Fibonacci retracement levels of the move up from 2011 low to the recent high and I am targeting the 76.4% level at 6718 to see in the low. Price may nudge a bit lower. Let’s see.
The final low might also be around support from the 76.4% angle which looks to intersect with the 76.4% Fibonacci retracement level in mid 2016.
Once that low is in place, I expect the uptrend to continue over the following years.