The German stock index DAX 30 has reached a critical -61.8% Fibonacci target zone. Will price action show a bearish reversal or a bullish trend?

This article explains why an uptrend breakout has a better probability. We also review the main patterns and targets.

Price Charts and Technical Analysis

DAX 30 is building a choppy and lengthy sideways correction. The consolidation is typical for a wave 4 pattern (grey). Let’s summarize what to expect:

• The moving averages are bullishly aligned: the 21 ema zone is above the 144 ema close, which is above the 233 and 610 EMAs.
• Price action is unable to close below the 21 ema low, which is indicating a mild correction in the larger uptrend. This is probably wave 4 (grey).
• The bearish bounce occurred at the -61.8% Fibonacci target. The next target is the -100 Fib target and round level of 15,000 and 15,100. The second target is at the -161.8% Fibonacci level at 15,700.
• The strong upside is probably a wave 3 (grey). The new high on the oscillators (green boxes) is confirming a strong uptrend. The wave 5 (grey) could complete just wave 3 (pink) of wave 3 (purple).

On the 1 hour chart, the consolidation zone is indicated by the purple boxes. Let’s check the 1-hour chart:

• Price action is testing the 144-233 ema zone. A bearish breakout could indicate a deeper retracement towards the 38.2% or even 50% Fib. 
• A bullish bounce is expected at the Fibonacci levels unless it breaks the 50% Fib. A break below 50% places this bullish outlook on hold (yellow circle) or invalidates it (red circle).
• A bullish breakout (green arrows) above the resistance (orange) zone could confirm the continuation of the uptrend via a 5 wave pattern (grey).