- Summary:
- The DAX index formed a hanging man pattern as the rally hit brakes. This is partly due to a sharp decline in German exports and imports in April
The DAX index declined by more than 0.90% as the recent rally took a breather. The index is trading at €12,720, which is a few points below the March high of €13,817. The divide between the gainers and laggards was similar, with Lufthansa being the best-performing stock in the index.
German stocks fall as German exports slide
Part of the catalyst of the decline of the DAX index was a significant decline in German exports in April. According to the statistics office, exports declined by 31.1% from a year earlier. That was the sharpest decline since 1950.
In the same month, imports declined by 16.5%. All this led to a significant decline in trade surplus from the previous €12.8 billion to just €3.2 billion. Analysts were expecting the surplus to decline to €10 billion.
The statistics office said that exports to France and Italy dropped by 48% and 40% respectively. Those to China fell by 12.6%.
These numbers are important for the DAX index because most companies in the index sell their goods overseas. For example, companies like Daimler, Volkswagen, and BMW sell most of their cars to other European countries, United States, and China. The same is true for companies like Beiersdorf, Merck and Bayer.
Best and worst performing German stocks
The best performing stocks in the DAX index were Lufthansa, Beiersdorf, Fresenius, and Wirecard. These stocks rose by more than 1.5%. Wirecard stock rose even as the company is being investigated by German authorities. Lufthansa shares rose as more countries start to reopen up. Indeed, most airlines in Europe have started to ramp up their schedules.
The worst-performer in the DAX index was Deutsche Bank, the embattled German lender. The shares are down by more than 4.50% after the company dismissed three leaders in its DSW unit. It was followed by Daimler, Volkswagen, Continental, and BMW, whose shares dropped by more than 4%. These shares declined mostly because the German government failed to include cash for clunkers program in its rescue package.
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DAX index technical outlook
On the daily chart, the DAX index is slightly above the 78.2% Fibonacci retracement level. It is also above the 50-day and 100-day exponential moving averages. Most importantly, the index formed a hanging man pattern, followed by a bearish candle. This is a signal that the index may continue with its pullback as bears attempt to retest the 78.6% retracement at €12,572.
On the flip side, a move above yesterday’s close of €12,924 will invalidate this trend. It will signal that there are more bulls in the market, who will be willing to push the index higher.