Buy-and-hold proved to be a profitable strategy in the German DAX
Keeping up with its U.S. equivalent, the German DAX has been rising steadily ever since the election of Donald Trump. The index has climbed from 10 402 to 12 031 in less than three months, which is a good return in anybody’s book. However, news-interpreting is not among our best skills and this is not the approach we use to decipher the markets. What we rely on instead is the Elliott Wave Principle, with the help of which we our clients received the following chart before the markets opened on December 5th, 2016.(some marks have been removed for this article)
The chart above carried a strong bullish message. First, the decline between 12 398 and 8696 consisted of only three wave, which means it was corrective and we know that once a correction is over, the larger trend resumes. In DAX’s case, the larger trend was pointing north and so was our forecast. Second, the resistance of the upper line of the corrective channel, drawn through the last two major tops, has been broken and turned into support, which further confirmed the positive outlook. And third and most important, the wave count suggested the most powerful phase of the rally – wave (3) of III up – was about to begin. Hence, buy-and-hold seemed like a good strategy. The updated chart below shows how the situation developed.
Two days ago, the DAX exceeded the 12 000 mark for the first time since April, 2015. And while people praise Trump for lifting stocks around the globe, we believe that with or without him, the German benchmark index would have risen, because, as you just saw, there have been plenty of technical bullish signs anyway. Besides, no-one could tell how far will the so-called “Trump rally” go. The Wave Principle, on the other hand, suggested the bulls should be strong enough to push the price towards previous all-time highs.
