An increase of 2500 points or the equivalent of 17 percent since the end of September, of which 700 points alone since Thursday afternoon: the Dax has climbed for six weeks in a row, most recently by 5.7 percent. These developments show that the leading German index is extremely overbought – it has risen too high too quickly.
The probability that there will be a breather this trading week is correspondingly high. For the capital market expert Thomas Altmann from the investment house QC Partners, “the air is getting thinner”. After the impressive jump in the price, interest in buying has decreased significantly.
Because the investors who bet on rising prices at an early stage are likely to take their first profits with them. Investor sentiment is also signaling a temporary end rather than a continuation of the rally.
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After evaluating the Handelsblatt survey Dax-Sentiment, Stephan Heibel is certain: “The survey participants are fully invested. Further price impulses in the Dax can only come from foreign investors in the coming days.
It is quite possible that the Dax will not be able to sustainably overcome the 14,300 point mark this week and that the breather will begin.
The extent of these interim consolidations says a lot about the dynamics of the broader move higher. True to the motto: the smaller the decline, the more dynamic the subsequent rally.
The best example of this was the stock market year 2019, when there was no correction for the entire year, i.e. a drop of ten percent – a rather unusual occurrence. At the end of the year, the Dax was up 25 percent.
But where are the current stopping points? It would be ideal if the Dax remained above the level between 13,700 and 13,500 points. From this area, the Dax dynamically broke out last Thursday after the decline in US inflation. There is also the important 200-day moving average, which is currently at 13,595 points and is falling around seven points a day.
An indication of a test of the range would be a dip below the August high of 13,948, the first port of call for the upcoming breather. “But such a breather does not necessarily have to be accompanied by declining prices, but can also take the form of sideways consolidation,” says sentiment expert Heibel.
Buying by foreign investors would be helpful for a sideways consolidation. This group of investors is likely to have already bought a good deal of German shares in the past few weeks and days, as can be seen from the rising euro exchange rate against the dollar. The annual low of the European common currency is identical to the Dax annual low; since the rally intensified last Thursday, the euro has already gained four percent again. Most recently, the euro was quoted again at 1.035 dollars.
A relapse towards the low for the year, which is 11,862 points, is considered unlikely. Because the current upward movement is not only supported by individual stocks, but by a clear majority of the 160 stocks from the Dax, MDax and SDax. Jörg Scherer, technical analyst at HSBC Germany, determined this using various indicators.
For the first time this year, this so-called “market breadth indicator” signals the “green light” for all German standard values. Because the larger the number of individual titles that are also in rally mode, the more sustainable the price gains. “For the first time in 2022, the German ‘blue chips’ will be in an upward trend,” says Scherer happily.
Look at individual values
adesso: Record sales and operating profit encouraged investors to jump in. The shares of the IT company rose by 9.4 percent. According to the information, the company increased the operating result before special effects in the third quarter by 30 percent to 33.3 million euros. Revenues increased by 39 percent to 241.4 million euros. On this basis, the company confirmed its full-year target of sales of EUR 800 to 850 million and an operating profit of EUR 90 to 95 million.
HHLA: The high energy costs and the imminent economic downturn are slowing down the port logistics group. However, the Executive Board confirmed the outlook for the year as a whole. The stock fell 1.5 percent.
Infineon: Infineon scores with investors with its balance sheet. According to the figures, the chip manufacturer’s shares shot up by 7.8 percent to EUR 31.50. In the future, sales should grow by more than ten percent per year instead of nine percent, as previously expected.
Rheinmetall: The takeover of the Spanish ammunition manufacturer Expal is well received by investors. The shares of the German armaments group rose by 6.7 percent. The step makes strategic sense, but the purchase price of around 1.2 billion euros seems high, said a broker. There is also the question of how the company will finance this deal.
Morphosys: Another setback in Alzheimer’s research at his partner Roche weighs on the share. The biotech company’s shares fell 29.2 percent. Roche shares slipped in Zurich by up to 4.8 percent and headed for the biggest daily loss in six months.
The Swiss pharmaceutical company had previously reported that its Alzheimer’s drug gantenerumab had missed the main goals in two large-scale clinical trials in the crucial phase 3. According to one dealer, this was also a severe blow for Morphosys. Because gantenerumab was once developed by Morphosys, Roche acquired the rights to the antibody in 2000 and has been fully responsible for clinical development and possible marketing ever since.
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