Markets

DAX® tear-off edge still exists

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The tear-off edge still exists

The weekly trading range of the DAX® remained within the previous week’s counterpart for the last five trading days. The resulting inner bar can be booked as a partial success. But the bottom line is that the trailing edge in the form of the downward price gap from mid-September (12,999 to 13,036 points) remains unchanged. Viewed through the strategic lens, the key support remains in the form of the 200-week line and the smoothing line for the last 200 days (currently at 12,216 / 12,172 points). In other words: At this level, the “double averages” form a massive area of ​​retreat. On the other hand, the above is to be closed. Downward gaps necessary to counter the negative implications of the recent spoilage edge. Against this background, we define a sustainable recapture of the mark of 13,000 points as the starting shot for the classic election rally or as a stepping stone for an early year-end rally. We examined the latter in more detail as the best-known seasonal phenomenon for the DAX® (see below).

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DAX® (Daily)

Chart DAX®

Source: Refinitiv, tradesignal

4th quarter: the best time for stocks?

The year-end rally is without a doubt one of the best-known seasonal anomalies. Around the globe, global stock indices often tend to be stronger in the fourth quarter. Based on the data since 1988, we have therefore examined how the DAX® has developed in the last three months of the year. First of all, the most important message: In 32 years, the share barometer had to accept price losses only five times in the 4th quarter – most recently in 2018. In the 27 other cases, the “DAX® final investment” would have been worthwhile. The probability of rising prices in the last three months up to the end of the year is therefore 84%. Investors who have consistently relied on the “year-end rally” phenomenon since the DAX® was founded will be happy about a sevenfold increase in their starting capital. An investment of EUR 1,000 has grown to almost EUR 7,000 in the last 32 years. This corresponds to an average return of 6.25% per year. Although investors invest a quarter of the time, the expected return of a typical full (stock) year can almost be realized. This year, from October 10th, another supporting factor will be added with the classic election rally.

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DAX® (Weekly)

Chart DAX®

Source: Refinitive, own calculations

Remarkable indicator signals!

Last Friday we discussed the possible break in the bearish trend for Henkel shares since 2017 (on a monthly basis currently at EUR 89.01) (see “HSBC Daily Trading” of October 2). A sustained break in trend would have the charm that the share price development of the last three years can then be interpreted as a drawn out correction flag (see chart). Due to the strategic importance of a possible liberation strike, today we want to take an additional look at the monthly chart of the paper. In the higher time level, a number of indicator signals stand out. While in the course of the relative strength there is a completed bottom formation and a successful break in the downward trend, the MACD can come up with a new entry signal – at a historically low level. Both trend followers therefore give hope for the trend break described above. If the breakout is successful, the highs at EUR 96/97 in combination with the 90-month line (currently at EUR 96.94) define an initial target. In the long term, a dissolution of the above justifies Flag pattern even made a run-up to the previous record high of 129.90 EUR.

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Henkel Vz. (Monthly)

Chart Henkel Vz.

Source: Refinitiv, tradesignal

Highest level since the beginning of the millennium

We recently identified a very special “bullish engulfing” on a quarterly basis, which even includes the bodies of the previous six (!) Quarterly candles, as well as a classic “V-pattern” in the weekly range as the decisive price drivers for the Infineon share (see “HSBC Daily Trading “from September 15th). The combination of these two time levels did not fail to have its effect, because the technology title has now reached a new high (EUR 26.07). The jump over the highs of 2018 at EUR 25.50 / 25.76 is even associated with the share’s highest price since 2002. In the event of a sustained jump over these hurdles, the price development of the last 20 years can also be interpreted as long-term bottoming out. The existing buy signals from the MACD and the Aroon on a weekly basis are joined by synchronous entry signals from the two trend followers in the monthly area. On balance, the share price should move towards the low of the 1st quarter 2001 at a good EUR 30. From a risk perspective, however, either the most recent upward gap on a daily basis (EUR 24.60 / EUR 24.23) or the February high (EUR 23.07) offer a hedge on the downside.

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Infineon Technologies (Weekly)

Chart Infineon Technologies

Source: Refinitiv, tradesignal

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