Dax closes in the red – Fresenius benefits from speculation about hedge fund entry

Dax closes in the red – Fresenius benefits from speculation about hedge fund entry

Düsseldorf After the significant price gains of the past few days, the German stock market continues to move sideways. The Dax closes 0.2 percent down this Wednesday at 12,741 points. On Tuesday, the stock market barometer ended trading in the black.

Given the current price momentum, such breathers come as no surprise. As recently as Thursday last week, the index was trading at just 12,000 points. Since the low for the year at the end of September, the plus at the top is already more than 1050 points.

Wednesday trading focused on the 50-day line, which is currently at 12,852 points. This level was only traded intraday on Tuesday. For Jörg Scherer, technical analyst at HSBC Germany, the next stop on this upward movement is at 13,400 points. And as long as the Dax remains above 12,400 points, the current short-term upward trend is intact.

Martin Utschneider, technical analyst at private bank Donner & Reuschel, is more skeptical. “The pattern is very similar to that of the two bear market rallies in March and August of this year,” he says and warns: “The momentum in the Dax 40 is slightly positive, but could turn around again.” The view should therefore also go down. The smallest negative reports can quickly lead to setbacks.

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Several factors are helping the Dax at the moment. The reporting season has been going well so far – the lower gas price is making things easier for energy-intensive companies and households. However, this morning there was the first setback with the figures from Sartorius.

Netflix beats analysts’ expectations

Tailwind is also coming from the USA: New series such as “Dahmer – Monster” have helped the Netflix group, which presented figures after the US stock market closed, to increase users again. The streaming service exceeded analysts’ expectations. The share rose by 15.1 percent on the German stock market.

Small expiry date in focus

A decision on the new direction could probably be made on the German stock market in the coming week. Next Friday is the small expiration day. On such days, futures contracts on indices and individual stocks expire.

The last two expiry days in September and August of this year were a disaster for the price development of the leading German index. In both cases, the Dax then slipped around 1000 points by the end of the month. And the 13,600 points at which the Dax was still listed on August 19 have not been reached since then.

A look at the current positioning of the professionals does not indicate anything spectacular. According to the current data from the provider Stockstreet, most of the calls, with which professionals bet on rising prices, and most of the puts, with which buyers hedge against price losses, are at the settlement level of 12,500 points. Other larger positions tend to be above this mark. Until the futures contracts are settled on Friday, there are no indications that the price will fall.

Short sellers increase their bets on Varta shares

The situation with the Varta share is remarkable. Since the beginning of the year, the price of the former favorite on the stock exchange has fallen by almost 75 percent – to the delight of the many short sellers who are betting on falling prices.

Despite this, the short sellers are not taking any profits. Instead, the short rate has risen from almost six to 8.75 percent since the middle of the year – an indication that professional investors see further price risks.

The high positions are also striking: According to data from the “Bundesanzeiger”, the Blackrock hedge fund shorted 2.81 percent of freely tradable Varta shares. The latest earnings warnings and the resignation of CEO Herbert Schein triggered a price crash at the German battery manufacturer. Within a few days, the value of the share had halved.

From the record high of EUR 181 at the beginning of 2021, the paper has now fallen to EUR 27.15 (October 13). As a reminder: The initial listing when Varta went public in October 2017 was EUR 24.25. The former darling on the stock market has become a gambling paper. Also today, Wednesday, it goes down another 8.3 percent to 29 euros.

If you compare the Varta price development in detail with the selling and buying back of the short sellers, you immediately notice that a significant part of the price gains is related to the smaller buybacks by the hedge funds in the meantime.

Because short sellers rely on falling prices with so-called short sales. To do this, they borrow shares for a small fee and sell them immediately in the hope that prices will fall and they can buy back the shares at a lower price before the return date. The difference between the sell and buy price is your profit.

Look at other individual values

Sartorius: After a strong first half of the year, the pharmaceutical and laboratory equipment supplier also recorded high growth in sales and profits in the third quarter. However, the pace of growth has slowed recently. The share slipped over 18.5 percent to 315.70 euros.

Fresenius: Fresenius shares were driven up by speculation that financial investor Elliott Investment Management might be interested. The papers jumped by up to twelve percent to 23.18 euros and were thus at the top of the Dax. At the end of the day, the plus was just under 5.1 percent. Dealers referred to a report by the Bloomberg agency, according to which the hedge fund is said to have secured a significant stake in the health care group.

Zalando: The company loses more top managers. Sustainability boss Kate Heiny will leave the online fashion retailer. Technology chief Jim Freeman, whose contract ends in March 2023, is also about to leave. Ralf Herbrich, a specialist in artificial intelligence, has left Zalando in recent months. The fashion retailer is struggling with consumers’ reluctance to buy and has had to accept a decline in sales in recent quarters. The stock loses 1.7 percent.

Strategy: The diagnostics company expects sales to fall in 2022 due to backorders. Analysts had expected a slight increase. The share price fell 1.8 percent.

Flatexdegiro: The uncertainty of many investors during the crisis caused trading at the online broker to collapse. The company increased sales and earnings in the third quarter. However, the number of transactions processed via Flatexdegiro’s platforms has shrunk in the first nine months. The share lost 2.3 percent.

Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.

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