Nice Correction On Dax; More Upside Ahead?

23 May

Stocks remain in risk-on mode after Nvidia's beats earnings expecations, so it’s not surprising to see DAX also turning up. Index has stabilized at the first support area between 18,620 and 18,560 from where we can see the price attempting to break out of what can also be referred to as a bullish flag, therefore, the market will at some point resume higher into a 5th wave.

However, fourth-wave corrections can sometimes be tricky and complex, and it's not always easy to define the end of a wave four unless you wait a bit further for confirmation of a bullish reversal. In our example, if the DAX comes back to this week’s lows, the next significant, but also very strong, support can be found at the 38.2% Fibonacci level around 18,500.

In either case, we believe the DAX will remain in an uptrend, but don’t be alarmed by a potential top if we see deeper price action. The most important invalidation level for a trend change is at 18,237. The upward projection for wave 5 should be around 19,000.