DAX initiates bearish correction
20 April 2023
At the end of March, DAX was rising rapidly higher almost every day. In April, the pace slowed down a bit but even with the lower momentum, DAX was able to make new long-term highs almost daily – slowly but surely. Such a small volatility on the local tops is often an invitation to a bigger correction. Simply put, buyers were just exhausted on the higher levels and there was not enough money on the market to keep pulling the price higher.
After weeks of rising, Thursday finally brings about a bearish correction. In the early hours of the European session, DAX dropped significantly, which, in theory, initiated a mid-term downswing. With all this, questions are arising about a potential target for this move. To measure corrections, Fibonacci levels always come in handy but in this case, they are not aligned with the previous support and resistance levels and, in my opinion, the latter might have a bigger impact here.
The first potential target for the drop is the 15650 points (green) which was a resistance in February and March. The second potential support is the absolutely crucial horizontal support on the 15250 (pink) that was in play many times for the past few months. As long as the price stays above the second one, the long-term sentiment on DAX remains positive. A breakout would be a major sell signal, but chances of that happening at the moment are rather low.