Bloomberg News

Germany’s DAX Will Sink 5% on Slide Below 200-Day Average

May 31, 2012

Germany’s DAX Index (DAX) will extend its slide if the gauge closes below its 200-day moving average, pushing the benchmark measure as much as 17 percent below its most recent high, according to Danske Bank A/S. (DANSKE)

The DAX might slide another 5.4 percent, extending its 12 percent drop since March 16, after breaking the support level. That would lead the benchmark to fall toward its next support, a Fibonacci retracement level of 5,942.85, said Lars Skovgaard Andersen, a senior equity analyst who helps manage about $107 billion at Danske Bank’s asset manager Danske Capital.

The DAX has stayed above its 200-day moving average since January. Even so, the 30-stock gauge has fallen from the middle of March, moving in a “downward trend channel” as both peaks and troughs trended lower, the analyst said.

“We’re at a key junction, where stocks will either break out of the trend channel or go lower,” Skovgaard Andersen said. “We’re buying as we’re still above the 50 percent Fibonacci level and the 200-day moving average, but we have the exit strategy ready in case these levels break to sell either the stock or hedge the market risk,” he said.

German stocks have retreated as concern mounted that Greece will elect a government that refuses to carry out austerity measures, triggering the country’s withdrawal from the single currency. The DAX plunged 1.8 percent to 6,280.8 yesterday, its biggest decline in a week.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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