High Lufthansa Plus puts pressure on hedge funds

Dusseldorf The price decline on the German stock market continues. In the morning the Dax lost 0.4 percent and was trading at 12,045 points. At the start of trading, the Frankfurt benchmark had dropped below the 12,000 point mark, the daily low is 11,957 points.

The current data on investor sentiment do not signal a new crash. The DAX rally started in March is not yet over, the leading index is currently in a correction phase, says behavioral economist Joachim Goldberg after evaluating the current investor survey conducted by the Frankfurt Stock Exchange.

In this phase there can be short-lived, sometimes powerful impulses, pronounced trends currently have no great opportunities.

A look at the Dax chart shows that the Correction phase since the beginning of June has a range of around 1300 points. This month the leading German index moved in a range of 13,900 points on the upper and 12,600 points on the lower side.

The Lufthansa share is one of the biggest winners with an increase of 9.4 percent. The uncertainty is over, major shareholder Heinz Hermann Thiele wants to approve the rescue package at today’s Annual General Meeting on Thursday. In addition, the airline has agreed a savings package with the flight attendants.

The coming trading days and weeks are likely to be exciting: Because in the past, the hedge funds have relied heavily on falling prices for the crane airline. Although they have released part of their bet in the past few days, the rate is still at least 9.4 percent of all freely tradable shares (as of Tuesday, May 23) according to the Federal Gazette.

At the beginning of May this year, the figure was 11.73 percent. Two hedge funds cut their quota by 0.19 percentage points on Tuesday this week.

What does this mean for the Lufthansa share? In any case, that the nine participating hedge funds have to come up with a strategy at which point in time they have to buy back the shares.

Because short sellers speculate on falling prices by lending and selling shares in a company, for example in investment funds. In order to return these shares after the deadline, you have to buy them again beforehand – if possible, of course, at a lower price.

A short sale rate of 9.4 percent means that the funds have to buy back 44.95 million shares as cheaply as possible. The entry prices of the hedge funds are difficult to understand, especially since Lufthansa shares have been the focus of short speculation for years. This quota was significantly increased in March 2020, which helped the share price to slide from twelve to eight euros.

But at the current level of just under ten euros, it is currently not easy to achieve very high profits from the short speculation. To make matters worse: The Lufthansa has descended from the Dax to the MDax since this beginning of this week.

That inevitably has result in a lower trading volume. Only 8.3 and 8.1 million papers were traded on Wednesday and Tuesday of this week, previously the average volume was ten million. That doesn’t make things easier for hedge funds.

In the Wirecard-Shares were not the only thing that caused hedge funds to drop prices with their short speculations, but also the former CEO Markus Braun.

He apparently had to significantly reduce his stake in the payment service provider and holds only 2.62 percent of Wirecard at the opening on Thursday. A week ago it was 8.04 percent. Braun has sold the equivalent of 7.9 million papers, which has further accelerated the price decline of the past few days.

The price decline of the Wirecard share continues: the paper loses 10.8 percent and is quoted at EUR 10.74. With a daily low of exactly ten euros, the share has reached a new low since the crash began.

The mood of consumption is slowly returning: After the rapid opening of the German economy, consumers are gradually shaking off the corona shock. For July, the GfK market researchers predict an increase in their consumer climate barometer by nine points to minus 9.6 points. “Consumers are increasingly waking up from the stiffness that had led to an unprecedented drop in sentiment in April,” said GfK expert Rolf Bürkl on Thursday. Economists surveyed by Reuters had only expected minus 12.0 points. But there is still no question of revived consumerism: the current value is the third lowest that the Nuremberg market researchers have ever measured.

Look at the individual values

Bayer: In the dispute over the allegedly carcinogenic weed killer glyphosate in the United States, the pharmaceutical and agrochemical group Bayer has agreed with a majority of the plaintiffs on a multi-billion dollar settlement. But Bayer has to dig deep into their pockets – for the comparison and possible future cases, up to $ 10.9 billion will be due.

The share benefits from this agreement, which was expected on the market, with a plus of 0.8 percent. Since the crash low in mid-March, the title has already risen by 50 percent, a better performance than the Dax. By the way, during the turbulence, Bayer shares were rarely in the focus of short speculators.

What the chart technique says

Yesterday’s onset of weakness has had an effect. Now the support area at the Dax is under pressure again. Because the upside gap from last week (12,133 to 11,968 points) was completely closed with today’s daily low of 11,957 points.

Chart technology interprets such upward price gaps as Signs of further increases in prices, they are an important area of ​​support. In this case, the daily low of Tuesday of the past week (12,133 points) is above the daily high of the previous Monday (11,968) of the past week. Now this gap has been closed; in the positive case, it could now serve as a springboard for further rising prices.

The smoothing lines of the past 200 days (currently at 12,157 points) and 200 weeks (currently at 12,062 points) are also highly competitive after yesterday’s slide. The 200-day line is an indicator of the long-term trend. If the Dax is trading above a rising 200-day line, investors see it as a positive sign and vice versa.

Bank HSBC’s technical analysts are still in good spirits. In her view, a seasonal breather until the end of June fits well into the US presidential cycle.

From the turn of the half year, there was usually a period of seasonal tailwind in the past when a new US president was elected in November.

Here is the page with the Dax course, here are the current tops & flops in the Dax. Current short sales by investors can be found in our short sales database.

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