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DAX Index Poised for a New High According to Elliott Wave Theory

DAX
DAX

DAX index trades with a bid tone, comfortably sitting above the 13,000 area. It held a bullish bias for the entire summer, and coils for yet another leg higher.

According to the Elliott Wave Theory, the DAX index forms a running correction. Such a pattern usually appears before the extended wave in an impulsive structure – a wave that exceeds 161.8% of the first segment. If that is the case, new all-time highs in the DAX index are just a matter of time.

Confident Von Der Leyen SOTEU Speech

Ursula von der Leyen delivered its first SOTEU (State of the European Union) speech this week. A confident and bold speech, it reinforced the values the European Union is built upon and what lies ahead.

The Green Deal, the Recovery Fund, and the joint debt issuance are just one of the few things that started under von der Leyen’s leadership, and the market took them seriously. The Euro is stronger it has been in years, triggering verbal intervention from the ECB, concerned about the EURUSD exchange rate.

Dax Index Technical Analysis

The Dax recovery is nothing short of impressive. Unequal at times, it resembles perfectly the complex, running correction forming as the second wave.

Everything that appears in blue in the chart below forms a triple three running – one of the most complex patterns part of the Elliott Waves Theory. It has two intervening waves (the x-waves) and ends with a triangle.

The triangle is the key to trade the pattern. The price must break the b-d trendline, and that is the signal that the third wave has started.

Therefore, to trade the DAX index on the long side, bulls must wait for a break above the b-d trendline. Going long there needs a stop-order at the previous higher low (i.e., the e-wave of the triangle). As for the target, measure 161.8% of the first wave and projected from the end of the second wave (i.e. the e-wave of the triangle). That is enough for a healthy risk-reward ratio and an all-time high for the DAX index.

To learn the Elliott Waves Theory, consider enrolling in our trading coaching program.

Dax Index Price Forecast