After bottoming out at 3565.00 zones, we can see on the weekly chart below how DAX 30 succeeded in forming a classic reversal pattern [inverted head & shoulders] with a neckline around 5058.00 zones.
DAX Index - Annual Technical Analysis for 2010
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This neckline has been breached earlier, clearing the path towards the ideal technical target which resides around 64450.00 -61.8% Fibonacci level for entire downside move from 8230.00 zones to the aforesaid bottom of 3565.00-.
Thus, the classical point of view shows that the index is to penetrate 5900.00 resistance level -50% Fibonacci level- supported by positive signs on AROON, Gator and AC indicators.
Looking at the recently established bullishness from the recorded low on the daily chart, seen below, we will notice that DAX is on its way to complete the bearish harmonic AB=CD pattern.
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The second technical target of the potential reversal zones [D] for this pattern resides around 6245.00 areas which are very close to 61.8% Fibonacci level as we discussed before.
Adding to that, there are very sensitive points that will face the index around 6130.00 -100% Fibonacci expansion level of ABC movements- at 6130.00 zones, but momentum indicators show that it might be breached to reach the extreme target of the [D] point at 6245.00, which is also very close to 61.8% Fibonacci level of the bigger picture.
To recap, we think that all signs show that the index is capable of reaching the areas between 6130.00 and 6450.00 levels over short term basis.
The question now is what's next?
The index will face cluster resistance areas if it succeeded to reach those levels. Thereby, we believe that it will be able to force it to move downwards aggressively while the chart below shows another scenario that might cause bearishness over medium term basis.
The same weekly chart offers a potential Elliott count that might take the index in an aggressive southern trip to resume the impulsive downside formation.
This scenario is suggested by our technical team to be the main overview over medium term basis, as it might gather enough bearish momentum around 6130-6450.00, where the 4th wave will be completed. Then, the index will be in a definite need for the fifth, targeting 2890.00 zones.
Briefly, we can say that the short term outlook is bullish and we consider it as correction resumption to reach the projected targets of the harmonic and classical patterns before coming back to the downside over medium term basis.
A break of 7130.00 areas will damage any expected bearishness over medium term basis. These areas should hold to keep the suggested count valid.
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