Saturday, August 8, 2020

Dax continues to grow and has its sights set on continuing the rally

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Düsseldorf The mood on the German stock market remains friendly. In the first trading hour, the Dax rose by 0.2 percent to 12,639 points.

However, trading is likely to run smoothly this Friday, Wall Street remains closed due to the Independence Day.

A look at the Dax chart shows that after the significant price gain on Thursday yesterday, the leading index is once again targeting the continuation of the rally. According to technical analysis, a higher price in July compared to June, combined with a higher monthly low in comparison, is the classic definition for a (medium-term) upward trend.

To do this, the stock market barometer would have to break the 12,913 mark, the highest price in the past month. And in addition, no longer fall below 11,957 points, the June low. The leading index has met these criteria of an upward trend since mid-March.

But there is a strange situation: Share prices are rising, although the second wave of corona is in full swing in the United States. There is also no “risk-off mood” on the bond markets, investors seem to be ignoring the associated risks and continue to buy high-risk assets.

For the analysts at Landesbank Helaba, the stock markets have already priced in a lot of positive things. “The risk of a correction should not be underestimated“, Say the experts. The reason could be disappointing economic figures, which cannot be expected today. One of the few economic data on the diary is the barometer for the mood of German purchasing managers and it is a public holiday in the USA.

The situation at Wirecard is also strange: The stock has lost 96 percent of its value in the past four weeks and now hedge funds are increasing their speculation on falling prices.

In the meantime, the so-called short sale rate according to the Federal Gazette is again at least 8.77 percent (as of Wednesday this week). Three hedge funds increased their short speculation on Wednesday. The quota could be even higher because only values ​​from 0.5 percent have to be published.
On June 18, this figure was at least 15.2 percent and fell sharply after some funds cashed out. At the moment, 10.8 million papers are still being “shorted”.,

Shortsellers bet on so-called short sales on falling prices. To do this, they borrow a share for a certain time for a fee and then sell it on the market. Your calculation: If the price drops by the return date, you can buy back the securities on the stock exchange at a lower price.

They draw the difference between the sales and the reduced buyback price as profit. On the other hand, if the price rises, the short sellers are at risk of losing. As of Friday, the share is up more than ten percent at the start of trading.

Look at the individual values

Heidelberg Cement: The share of the Heidelberg building materials group benefits from a positive analyst opinion and increases by 2.4 percent. Morgan Stanley upgraded the paper from “underweights” to “overweights”.

Look at other asset classes

However, the increasing number of coronavirus infections make crude oil investors nervous. The Brent variety from the North Sea is cheaper on Friday by 1.2 percent to $ 42.64 a barrel. “The market has become increasingly confident that easing travel and business restrictions will drive demand,” commented ANZ Bank analysts. “However, the course of the pandemic jeopardizes this recovery.”

What the chart technique says

The technical analysts at HSBC-Bank are still optimistic. For them, the consolidation movement that has prevailed since June 23 has ended.
In this phase, the uptrend line was put to the test and was hit with the daily low of 12,095 points on Wednesday. This line results from a combination of the lows of mid-March and mid-May.

Ultimately, the trend line held up. The 200-day line, an indicator of the long-term trend, is now also listed in this area.
Should the Dax break the 12,700 point mark, the HSBC should start again at the 13,000 mark.

Here is the page with the Dax course, here are the current tops & flops in the Dax. Current short sales by investors can be found in our short sales database.

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