Bloomberg News

German Stocks to See Short-Term Slump; Technical Analysis

October 24, 2012

German stocks will decline by 5.4 percent before resuming the rally that started in June, as short-term moving averages signal bearishness, while long-term averages are bullish, a technical analyst at ING Groep NV said.

The Moving Average Convergence-Divergence, or MACD, chart has fallen below a supporting trend line that held since early July, indicating the benchmark DAX Index (DAX) will slide to meet its 200-day moving average, Roelof-Jan van den Akker said in a telephone interview from Amsterdam.

“I’m not bearish but short-term, I expect some further selling pressure before prices could be bottoming and rallying to the upside again,” Van den Akker said. “This is just a pullback in the uptrends. Looking at this MACD, it makes sense that current support levels will not hold.”

The gauge yesterday slipped below 7,210, where the most- recent support line and the gauge’s 50-day moving average meet, triggering the slump, he said.

The measure may fall to 6,915 and extend losses to 6,785 -- 5.4 percent below yesterday’s close of 7,173.69 -- before rallying again to a new high above 7,480, Van den Akker said.

The DAXK Index (DAXK), the price gauge using the same weightings as the DAX while not adjusting for dividends, made a golden cross yesterday, with a rising 100-day moving average crossing above a bullish 200-day moving average. This signaled advances in German stocks will continue, he said.

The DAX has gained 20 percent from its 2012 low on June 5 as Greece formed a new government, European leaders agreed to address flaws in their bailout programs and central banks announced further stimulus measures.

MACD is a plot of values obtained by subtracting the 26-day exponential moving average from the 12-day average. The signal line is a nine-day exponential moving average of the MACD, and provides buy and sell signals.

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

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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


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