Facts:
- The MACD average crosses the signal line from above on the D1 interval.
- The yield on German bonds has reached its highest level in 14 years.
- The current P/E ratio of the DAX index is at 19 compared to the 5-year average of 15.
Trade: Short position (SHORT) on DE40 at market price.
- Target: 24000
- Stop: 25400
DE40 (D1)
Source: xStation5
Opinion: The DAX40 index has witnessed a significant correction, justified by a substantial increase in geopolitical tensions with the USA. However, this is merely a catalyst for declines, and the index is under pressure from a range of other fundamental factors. German bond yields are at their highest levels in 14 years and exceed the average dividend rate of companies in the sector. This means that companies will have to engage in fierce competition for capital. Indicator analysis of the index shows overvaluation compared to averages in terms of P/E and P/S, among others. The scenario of a downward correction is also supported by technical indicators, as shown by the MACD. The aggressive rhetoric of the USA towards Europe significantly increases the risk for the stock market.
Methodology and assumptions:
- The recommendation is based on technical analysis of the chart, particularly EMA averages, RSI, Fibonacci levels, and fundamental analysis of the German stock and debt market.
- The target level was determined based on the dynamics and range of previous corrective movements and FIBO levels.
- The defensive stop-loss order was determined based on a favorable risk-to-reward ratio.
