The DAX Index saw a strong rise featuring three swings after reaching a low point on November 21, 2025, and it has now hit a new all-time high. According to Elliott Wave Theory, trends typically have five waves, not just three, which means we might still see bullish momentum. The journey began from the November low, with wave 1 finishing at 24,474.62. This was followed by wave 2, which corrected and ended at 23,923.96. Wave 2 formed a zigzag pattern: wave ((a)) ended at 24,173.28, wave ((b)) at 24,318.30, and wave ((c)) at 23,927.96, marking the end of this correction.

Wave Progression

After wave 2, the index moved higher into wave 3. Here, wave ((i)) reached 24,356.11, while wave ((ii)) corrected to 24,203.37. A strong wave ((iii)) pushed prices up to 25,428.43. Wave ((iv)) then slightly adjusted to 25,338.30, and wave ((v)) peaked at 25,507.79, completing wave 3. Currently, we are in corrective wave 4, which began after the low on December 18, 2025. As long as the support level at 23,927.96 holds, this phase might stabilize and could develop into a three, seven, or eleven-swing pattern, paving the way for more upward movement. We are observing the DAX in a corrective phase following its strong rally to a new high of 25,507.79 last year. This pullback is seen as a temporary pause before the next significant rise. Recent economic data, like the January ZEW Economic Sentiment for Germany at a slightly improved 14.5, suggests the market is consolidating rather than reversing. The key level to watch in the coming days is 23,927.96, which was the low point in early December 2025. As long as the index stays above this critical support, the bullish trend remains intact. Therefore, this dip should be seen as a buying opportunity rather than a cause for concern.

Strategies for Traders

For traders dealing in derivatives, this signals a strategy to prepare for the next upward movement. One option is to buy call options with strike prices above the recent peak, such as 25,600, with expiration dates in March or April 2026. This gives enough time for the current corrective wave to bottom out and for the expected fifth wave rally to start. Another strategy is to use options to bet on support holding firm. Selling out-of-the-money put credit spreads with a short strike below the key 23,927.96 level can be a good way to earn premium. This approach benefits from both an increase in the index and time decay, as long as the critical support remains unbroken. Historically, pullbacks of 3-5% are normal during strong bull markets like the one we experienced in the last quarter of 2025. The current decline fits within this expected range, suggesting that the main trend is still upward. Additionally, the European Central Bank holding rates steady provides a stable environment for stocks to continue their climb once this consolidation period ends. Create your live VT Markets account and start trading now.

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