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TecDAX: Buying Opportunity In German Technology

Sep. 21, 2020 11:49 AM ET
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TecDAX is a stock index which tracks the performance of 30 largest German companies from the technology sector. Even though these enterprises are of a high economic importance, their market capitalization and the book order turnover are far below of that of the DAX index. The TecDAX is related to DAX in a similar way like NASDAQ is related to Dow Jones Industrial Average index.

From technical perspective, NASDAQ has been the strongest index in the US. As a matter of fact, it has provided high rewards for those traders who were buying the dips for more upside. One of the features of the market behavior is that weak indices remain weak and strong indices remain strong. The fact that NASDAQ has been outpacing other US indices makes it a good candidate to buy it again once the indices turn higher again. Similar strong uptrend can be also seen in a behavior of TecDAX. This index, therefore, allows entering the German technology sector by providing investors and traders with high returns and protecting them, at the same time, from the defaults originating from trading of single stocks.

TecDAX Monthly Elliott Wave Analysis 09.20.2020

The monthly chart below shows the TecDAX index $TDXP listed at Frankfurt Stock Exchange. From the all-time lows, the index price has developed a cycle higher in wave (I) of a super cycle degree. It has ended in November 2007 at 1060.35. From there, a correction lower in wave (II) has retraced part of the rise by printing a bottom in March 2009 at 387.50.

In 2013, TecDAX was able to make a higher high opening up a bullish sequence. As a matter of fact, it has extended from March 2009 lows far beyond 1.618. Therefore, the cycle higher is an impulse in blue wave (III). It has reached 3051.44 highs in September 2018. From the top, a correction lower has unfolded as an expanded flat which has found its bottom in March 2020 at 2127.05.

TdecDAX Daily Elliott Wave Analysis 09.20.2020

The daily chart below shows in more detail the $TDXP price action from the March lows. The advance is an impulse in red wave I which has ended in June 2020 at 3266.82. While below there, a pullback in wave II may find support in 3, 7 or 11 swings above the 2127.05 lows. So far, the correction unfolds in a manner of a double three pattern which is a 3-3-3 structure. As of right now, the pattern looks incomplete. The price can, therefore, fall lower towards 2807.92-2565.53 area to end the correction in wave II. There, buyers can enter the market for an extension higher in wave III of blue wave (V) to new highs. Alternatively, a bounce in 3 waves at least should happen.

As a consequence, TecDAX should furthermore surprise many investors and traders by pushing higher in another rally. In the same way as NASDAQ in US, expect TecDAX to remain the strongest German index.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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