The fears of investors in the DAX have materialized. Despite optimism stemming from trade talks between the US and China, the DAX has entered a correction, which has already shaved over two percent off the index from its all-time high. Yesterday, on Tuesday, the DAX closed down 0.7 percent below 24,000, at 23,987.56 points.
DAX Seasonality with Grim June Forecasts
While we can still speak of consolidation at a high level, the stock market, as is well known, has a memory, and June is considered one of the weakest months of the year among market months. In the past 20 years, June has only closed in positive territory in 40 percent of Junes. In the last 12 years, the statistics have worsened further, with the DAX achieving a positive close in only 4 out of 12 years. The seasonal signs for the index are consequently negative, suggesting that the consolidation at a high level could potentially turn into a substantial correction. The next support level is around 23,700 points.
BASF Stock with Momentum at its Support Level
Among individual stocks yesterday, Porsche stock soared to the top of the 40 index values with a gain of 3.4 percent, followed by BASF stock, which climbed 2.8 percent. BASF has appeared in the top 3 for the second consecutive day. The stock is trading near its yearly low at an important support level. Since the stock has been bought multiple times at this support price of around 42 Euros, there's a possibility that the stock will find demand again. The potential to its yearly high of around 55 Euros is still over 26 percent.
In summary, the DAX is currently under pressure and struggling to avert a deeper correction. For this to happen, the support levels should hold to prevent further sell-offs. The signals from China and the US are certainly positive, but the DAX currently seems to be having difficulty translating these signals into buying interest, meaning the market continues to be dominated by profit-taking interests.
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