Hedge funds dissolve speculation on corona losers

Dax curve in the trading room in Frankfurt

The development of the coronavirus pandemic also remains in the focus of investors.


(Photo: dpa)

Düsseldorf After a weak start to trading, the German stock market is on the up again. At noon, the Dax rises by 0.2 percent and is listed at 13,076 points. On yesterday’s trading day, the German benchmark index was still in the red for the entire trading day and ultimately closed 1.2 percent weaker at 13,053 points.

Despite the positive trend on today’s trading day, the German stock market barometer could fall back in the direction of the level before the price jump last Monday. That would be the area around 12,700 points.

From there, at the beginning of this week, the Dax shot up more than 600 points within an hour because the pharmaceutical company Biontech Had reported success in finding a vaccine against the coronavirus.

Should the Dax fall back into the area around 12,700 points, those would probably get inwho had rated the price jump as an exaggeration, i.e. could not benefit from these price gains on Monday.

The specifications from the USA weigh on: the US indices lost around one percent. However, US futures contracts signal slightly higher opening prices on Friday, which also supports the Dax.

From a fundamental point of view Federal Reserve Chairman Jerome Powell’s warning sent US markets into the red. The next few months could be challenging for the US economy, he said.

From a sentiment analysis perspective these price losses were no surprise. US investors are almost euphoric, which is a counter-indicator. The bull share among US private investors is just under 56 percent, the highest level since January 2018.

The DAX price has changed little compared to its status before the price jump last Monday and only around 300 meters are currently left of the price jump. But a lot has happened with the individual values. So the hedge funds are gradually beginning to dissolve their short speculations on the loser stocks of the corona crisis. The best example of this is that Lufthansa-Share, which rose by around 15 percent after the Biontech report last Monday.

On Friday, the so-called short sale rate for the crane airline share was 11.48 percent of all freely tradable paper. Since then, this value has been almost halved and according to data from the Federal Gazette it currently stands at 5.94 percent (as of 11/11).

Short sellers bet on falling prices with the help of short sales at individual companies. For this, the unregulated investment funds borrow the corresponding shares for a fee. They then sell the paper in the hopes of buying it back at a lower price. The difference is the profit.

Trading in Lufthansa paper was extremely brisk during this period, with the hedge funds changing their short sale quota nine times since Monday. The trading volume was correspondingly high: in the past five trading days, this rose to an average of almost 13 million papers. In the past four weeks, an average of just 6.6 million Lufthansa shares were sold and bought each day.

A similar picture also shows the short sale rate at the airport operator Fraport, whose stock has risen more than 30 percent since Monday noon. The short sale rate is now only 1.7 percent; the trading volume of this security has almost doubled in the past five days compared to the past four weeks.

The high price gains of papers such as Lufthansa, Fraport or Airbus (plus 20 percent) are compared to significant losses of the previous corona loser shares since Monday. The MDax value is one of the biggest losers Shop pharmacy with a minus of around twelve percent this trading week.

There were other reasons as well. Several top managers at the Dutch mail-order pharmacy had sold shares that they had previously received as a reward for their performance. You have virtually “silvered” your success bonus.

Accordingly, the trading volume for the pharmacy value has doubled in the past few days. The short sale rate of the hedge funds remains high at 9.86 percent, but was previously an extreme 15 percent, according to the Dutch website Shortsell. Despite the price losses this week, the paper has still risen by more than 300 percent since the corona crash on the stock exchanges in mid-March.

Dates today

Data on consumer confidence and producer prices came from the USA on Friday afternoon. The University of Michigan consumer survey is unlikely to be dominated by the topics of Biden victory and vaccine. The analysts at Landesbank Helaba expect the survey results to be slightly different.

Look at the individual values

Deutsche Wohnen: The real estate company German living has hardly felt the effects of the corona crisis so far. That gives the share a plus of more than one percent. As before, just over one percent, only a few tenants would have reported and requested crisis-related support, the group said on Friday. Due to the ongoing real estate boom, the Group expects the portfolio to increase in value by around six percent by the end of the year.

German Euroshop: The share rises by 0.2 percent, although the shopping center investor posted a significant drop in earnings in the first nine months due to the pandemic. The recovery in the third quarter was stronger than expected, said a trader. Nevertheless, the uncertainty weighed on the titles. The company did not trust itself to make a forecast.

Stable: In the past quarter, the automotive and industrial supplier saw a recovery in business development thanks to increased vehicle production. That is why you are now looking ahead with confidence, said company boss Michael Büchsner. At the beginning, the share gained 0.6 percent. The company sells gas springs, dampers, and electromechanical drives for motion control.

What the chart technique says

Despite the price losses, the technical Dax picture is still positive. The first point of contact and therefore an important resistance is the most recent of a total of three upward price gaps in the past seven days.

Wall Street expert Koch: “The situation is in no way comparable to the lockdown in March”

Such gaps arise when the highest level on one trading day is below the lowest level on the following day. According to chart technology, they are considered support and can accordingly be used as a possible stop-loss mark for strategic investors. Specifically: 12,596 points was the highest level on Friday (November 6th), 12,671 points was the lowest price last Monday. As long as the Dax stays above 12,671 points, from a technical point of view there are no doubts about the current rally.

The next important resistance zone is at the course high on Monday at 13,297 points and extends to the high from the month of September at 13,460 points. There is the so-called Corona high, the highest level since the crash in mid-March, when the Dax slipped to 8255 points. Should the Dax break the mark, the record high of 13,795 points will be targeted.

On the downside, in addition to the three open upward price gaps, the area around 12,200 points is of enormous importance. There is, for example, the 200-day line, which is observed by long-term investors. This line is currently quoted at 12,065 meters and is therefore the most important, quasi-last support that has to last.

Here is the page with the Dax course, here are the current tops & flops in the Dax. Current Short sales of investors can be found in our Short Sales Database.

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