DAX Elliott wave view: Calling for another extension lower

DAX, the index from Germany, is correcting higher degree cycle from February 2016. Short-term Elliott Wave view suggests that the rally to 12597.51 at February 26.2018 ended Primary wave ((X)). Down from there, the decline unfolded as a 5 waves Elliott Wave Impulse Sequence which ended at 11730.50 and this 5 waves ended Intermediate wave (A) of a Zigzag structure in the higher degree. Zigzag structure is a 5-3-5 sequence and according to Elliott wave theory, after ending the first 5 waves, there should be a correction against the first leg in 3, 7 or 11 swings. The correction should then fail & extend in another 5 waves into the direction of first leg, i.e either Higher/lower. In DAX case, Intermediate wave (B) bounce should fail below 12597.51 high in 3, 7 or 11 swings for another extension lower in Intermediate wave (C) lower.

The internals of the decline from 12597.51 high ended Minor wave 1 at 12388, Minor wave 2 ended at 12515.5, Minor wave 3 ended at 11867, Minor wave 4 ended at 12006.50, and Minor wave 5 of (A) ended at 11725. The Index is currently correcting the cycle from 12597.51 high in Intermediate wave (B) bounce as Elliott Wave Zigzag correction, where Minor wave A ended at 12028 and Minor wave B ended at 11942.5. Above from there, Minor wave C of (B) remains in progress and expected to find sellers at 12242.73-12314.26, which is the 100%-123.6% Fibonacci extension area of A-B. The Index should extend lower in Intermediate wave (C) lower as far as pivot from February 26, 2018 peak (12597.51) remains intact. Also, it’s important to note that the 1-hour Chart below is showing bearish sequence tag, which represents the incomplete sequence to the downside. We don’t like buying it and once it reaches 12242.73-12314.26 100%-123.6% Fibonacci extension area of A-B, we are expecting sellers to appear again for 3 waves reaction lower at least.

Abdul Khan has been a licensed advisor in financial markets for nearly 15 years and throughout his career has advised some of Australia’s largest private investors and many internationally renowned financial institutions.   Abdul specialises in trading the Forex, derivatives and equities markets and has fulfilled managerial roles on both the European and New York desks. As a result of this specific experience he understands the inner... More