April on Dax started with a correction, which has a high chance to unfold even more. What we are having here is a long-term up trend, which stopped at the beginning of the April. For the past few months, the price is locked inside the channel up formation (blue lines) and is making higher highs and lows. Sentiment in the long-term is definitely positive but we are having few factors that can support a local bearish correction here.
First of all, we do have a false breakout over the upper line of the channel up formation (green). False breakouts usually lead to a movement in the opposite direction and that is what we are experiencing now. What is more, we can see that in the previous months, the price made two equal correction movements (grey areas). As we all know, history likes to repeat itself, so it would be nice to see the third the same movement here, especially that it would end exactly on the lower line of the channel up formation (red arrow).
Short-term situation looks as following: we do have a bearish gap, from Thursday (already closed) and one from today, which wasn't so far covered. From the price action point of view what we can expect here is the closing of the latest gap and a comeback to the mid-term sentiment – bearish correction. Negative scenario will be denied once the price will come back above the black line, which can be considered as a latest dynamic support, which now, after the breakout, is the closest resistance.
