Forex Market Analysis

DAX Advances in an Ending Diagonal Pattern


The German benchmark index, DAX 30 advances in the extreme bullish sentiment zone accumulating gains over 60% after the German index gained support on the March’s low at 7,957.6 pts. In spite of the up-up-up market sentiment, the DAX develops an ending diagonal pattern that is still unfinished, suggesting the current upward trend’s exhaustion.

Market Sentiment Overview

DAX 30 continues its recovery following the German index drop to 7,957.6 pts, on March 23rd, which is the lowest level since late August 2013. From Mach’s low, DAX 30 advances over 60%.


The next DAX chart presents the German index in its daily timeframe illustrates the 52-week high and low range. The German index currently develops an upward movement in the extreme bullish sentiment zone. The short-term bullish sentiment is being confirmed by the 60-day moving average, which acts as support in the latest trading sessions.

The extreme bullish sentiment aided by the DAX surpassing the opening price of the year boosted the up-up-up sentiment in the news media added with the incomplete ascending wedge that remains in progress. These signals suggest the exhaustion of the current short-term bullish trend.

On the other hand, the daily chart of the DAX Volatility Index (VDAX) shows a mostly sideways movement in the extreme bearish zone. At the same time, the lateral consolidation pattern developed by VDAX, which remains unfinished, could experience a new decline raising the possibility of further upside in the German stock market.

Consequently, the German stock market sentiment is being dominated by extreme bullish bias. However, the incomplete ascending wedge pattern suggests the exhaustion of the upward movement.

Elliott Wave Outlook

The short-term outlook of the German stock market under the Elliott Wave perspective unveils the progress on an incomplete ending diagonal pattern, developing a new upward movement.

The DAX, in its 4-hour chart, exposes the progress of an upward corrective formation that follows an internal structure of a zigzag pattern of Minute degree labeled in back. The bullish move began in the March low when the German stock market plummeted until 7,957.6 pts. 

Currently, DAX advances in its fifth wave of Minuette degree labeled in blue, which, in turn, develops an ending diagonal pattern in its internal structure. This terminal formation, subdivided in a 3-3-3-3-3 sequence of Subminuette degree, identified in green, is seen advancing in its fifth wave. This pending upward movement agrees with the likely decline in the DAX Volatility Index.

Consequently, according to the Elliott wave perspective, our short-term outlook anticipates further upsides as long as the price stays above 12,737.5 pts. This potential upside could strike the 13,544.3 pts completing the wave ((c)) of Minute degree identified in black.


By Eduardo Vargas

Eduardo Vargas is a technical analyst and independent trader based in Buenos Aires, Argentina. He is an Industrial Engineer and holds a Master in Finance degree. In 2008 began to trade Chilean stocks listed on IPSA. From 2013 started to trade CFDs on Forex, Commodities, Indices and ETFs markets. He analyses different markets combining the Elliott Wave analysis with Fibonacci tools. He provides a market mid-long-term vision.

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