Varta shares become the game ball of hedge funds

Dusseldorf The German Leading index Dax closed with a slight plus on Thursday. It closed 0.2 percent higher at 10,300 points. By early afternoon, the Dax had consistently posted a plus of around one percent. Then, however, he had turned negative in the meantime and then only recovered slightly.

In the afternoon, new, weak economic data was presented in Washington: Initial jobless claims last week totaled 5.245 million, a figure of 5.105 million was expected. The US stock exchanges were then initially turned negative. Recently, however, only the Dow Jones was slightly below the previous day’s level.

“The labor market in the USA is particularly hard hit by the pandemic and the associated restrictions on public life,” said the analysts at Landesbank Helaba. A total of approximately 22 million people have applied for financial support in the past four weeks.

The Philadelphia Region sentiment barometer has also weakened significantly and is even well below expectations. The index had already deteriorated significantly in March and is now at the lowest level since the mid-1980s. According to the Helaba analysts, economic worries are becoming greater as a result of the data release.

The Dax had reversed yesterday after a five-day recovery and went out of business with a minus of 3.9 percent at 10,279 points. According to chart technology, the Dax achieved a spot landing: from 10,279 points, the index started a rally in December 2018, which continued until a record high in February 2020.

A particularly interesting share is that of Varta, because the game of hedge funds with the title apparently continues. Today, Thursday, the paper rose by 6.7 percent to EUR 72.75, leading the list of winners in the MDax by far. This is no surprise, even if the share certificate at the close of trading was only 3.8 percent up: Five hedge funds are now under pressure to buy around 2.6 million shares. They may have started this Thursday.

Because the funds sold the Varta share short, as it is said in technical terms. So you’re betting on falling prices on paper. To this end, they have borrowed and sold 2.6 million Varta shareholders such as investment funds. But in order to return these shares, you have to buy them again beforehand. Of course, if possible at a lower rate.

With an average trading volume of around 272,000 shares per day in the past month, this buyback has to be carefully dosed so that the Varta price does not rise rapidly and puts pressure on the hedge funds. Because they want to buy back the papers cheaply.

Incidentally, this also explains the drop in yesterday’s Varta share of just under nine percent on Wednesday: the hedge fund Tiger Global increased its short sale rate from 1.06 percent on Tuesday to 1.16 percent on Wednesday.

With 40,421 million freely tradable shares, he borrowed an additional 40,421 papers and sold them on the day. With a total trading volume of 320,000 units on Wednesday, this sale is likely to have influenced price development.

With such figures, an analyst should say: only the fundamental values ​​are important.

According to the investor survey conducted by the Frankfurt Stock Exchange, the Dax is likely to buy again below 10,000 pointssays Joachim Goldberg after evaluating the survey on Wednesday evening. According to this survey, the mood has dropped significantly despite the rising prices, the Sentiment Index of the Frankfurt Stock Exchange has even dropped to the lowest level since the beginning of the 2002 survey.

To put it simply, negative sentiment is – according to sentiment analysis – a contraindicator because many investors have already sold.

The behavioral economist is also expecting further demand if this recovery rally should continue. “Above all beyond the 11,000 mark” there could be a sudden, rapid rise in prices (“short squeeze”) because investors would then have to buy more. But the Dax is still a long way from this point.

Look at the individual values

Zalando: The coronavirus pandemic is affecting Europe’s largest online fashion retailer. As a result of the weaker growth wants Zalando save now in the current year. Marketing and general costs are to be reduced by 250 million euros and investments by 100 million euros. Nevertheless, the company listed in the MDax average index wants to stick to its original plans and expand its luxury segment and also include second-hand goods in its range. Investors are happy about this news, the stock gained 6.2 percent on Thursday.

Easyjet: The company sees itself prepared for a longer standstill of its fleet and is pleased with its shareholders. At the start of trading, the paper gained more than ten percent and was the frontrunner on the London Stock Exchange. Most recently, however, the paper was down 2.5 percent. The low-cost airline expects to be able to survive a longer break. In addition, the bookings for winter are better than last year.

Look at other asset classes

The gold price put in its upward trend a little breather, but was recently back up 0.4 percent at $ 1,723 per troy ounce.

A side note: Because of the corona virus, the US Mint has to temporarily close its plant in New York. According to the Commerzbank– Commodity analysts are short of gold coins in particular and are distorting the gold market in the United States.

According to a coin dealer, the premiums for gold coins are already five to ten percent above the spot price of gold. After a long dry spell, the Americans bought as many gold coins in March as they did last in November 2016 at 151.5 thousand ounces, according to data from the US Mint. Demand continues: in April it was 56.5 thousand ounces again.

The bond market clearly shows: The decisions of the finance ministers last Thursday to deal with the corona crisis have no effect. The government in Rome will not apply for an ESM package. Accordingly, yields on Italian and other government bonds have risen significantly again.

Although the yield on a ten-year government bond falls to 1.805 percent, the market should soon test the reaction of the European Central Bank: when will it react to this with higher bond purchases? The yield spread (spread) between a German and an Italian government bond has increased to 240 basis points in the past few days, but is currently only at 228 basis points.

Oil prices recovered slightly on Thursday from the significant losses of the previous days. In the afternoon, a barrel (159 liters) of North Sea Brent cost $ 27.63. The price of a barrel of American WTI was little changed at $ 19.97. In the meantime, the price of US oil had dropped to $ 19.20, the lowest level since 2002.

“The oil price is at a low point, but the market could pick up again in June”

The oversupply of crude oil continues in the meantime, and the cut in production agreed by leading oil nations does not come into force until May. As the U.S. Department of Energy announced on Wednesday, stocks in the U.S. have grown significantly more than expected last week. According to the Ministry of Energy, inventories rose by 19.2 million to 503.6 million barrels. This is the strongest increase ever measured.

At the same time however, the Organization of Petroleum Exporting Countries (Opec) predicted a drastic drop in oil consumption due to the corona crisis. As can be seen from the monthly report published in Vienna on Thursday, the oil cartel is expecting the weakest demand for Opec oil in the second quarter in around 30 years.

Dealers still expect no short-term relaxation on the oil market. “In the short term, the market will remain flooded,” said Torbjorn Tornqvist, managing director of the oil dealer Gunvor Group.

What the chart technique says

According to technical analysis, the leading German index is now testing the important key support below the 10,300 point zone. On the one hand, the striking low of December 2018 with 10,279 points is important, the starting point for the rally, which lasted until the record high in February 2020. Just below that there are so-called price gaps for which there were no quotes this year. The last gap would be closed at a Dax level of 10,097 points.

The recent recovery rally led the Dax from 8255 points in mid-March to a new five-week high last Tuesday at 10,820 points. This rally remains intact as long as the stock market barometer remains above 9235 points.

If this upward trend remains intact, the next targets would be 11,030 and then 11,266 points, the August 2019 interim low.

Here is the page with the DAX course, here is the current tops & flops in the Dax. Current Short sales of investors can be found in our Short sales database.

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