Market Analysis

Is Bayer promising or too risky?

For many years Bayer was one of the solid stocks in the German DAX index. Then the pharmaceutical and chemical group decided to acquire the U.S. company, Monsanto and problems began for the stock and its management. The share has lost about 40% of its value since the takeover.

On Friday of last week, there was a novelty in German stock history. At the Bayer Annual Stockholders’ Meeting, the majority of stockholders voted against endorsing management’s actions. Although this vote does not have any real effects, it does express the mood of the stockholders and could have consequences for the composition of management.

After the fiasco on Friday, the share traded lower this Monday. The loss of confidence in management thus continued and manifested itself in the share price.

The question for investors is whether to get in or not? In the USA, the Group is confronted with several thousand lawsuits. Most of these are about the herbicide glyphosate and the question of whether it can cause cancer. The risks for Bayer stock, therefore, remain almost incalculable. On the other hand, the company could be traded much higher if there were no litigation risk in the United States. According to some analysts, the share is trading at a discount of approximately one-third of fair market value.

To date, however, there has been no higher court ruling against Bayer in the United States, and therefore none of the previous verdicts against Bayer has become final.

The stock thus remains risky but tempting. A glance at the chart shows that the stock broke downward out of the short-term sideways range between €59.95 and €62.55 at the end of the trading day. To see further rising prices, the stock must not only regain the sideways range but also bridge the March 20, 2019 gap. Short-term resistance on the way up could be in the €63.73, €66 and €68.75 ranges.

If selling pressure continues, short-term support in the €56.16 and €54.38 areas could be provided. A break below the support at €54.38 could trigger further price moves down. Possible additional support could then arise in the €50.20 and €47.50 areas.

The MACD indicator showed a bullish crossing of the MACD line with its trigger line in early April. Currently, however, the momentum in the histogram is decreasing, and the MACD line is moving towards its trigger line. Another cross from top to bottom would be a bearish signal.


BAYN.GE - daily chart. Source: ActivTrader

BAYN.GE Daily Chart | Source: ActivTrader


Written by Daniel Schuetz, External Analyst

*The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.

All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided.