In recent weeks, the steel group Salzgitter has made the headlines again and again; since the end of March, Salzgitter has been paying the first punitive US tariff duties of 22.9 percent, initiated by Donald Trump in order to protect US steel companies. Although Salzgitter’s business in the US makes up a mere 6% of the company’s revenue, the reactions of the investors indicate a much higher influence on the steel giant.
The strong sell-offs in the last weeks demonstrate the visible uncertainty of the investors; a few days after the announcement of the news, the break of the SMA 200 line created a further bearish signal.
In this technical analysis, we will go into more detail on the possibility of further falling prices.
The current chart image of the stock
In the daily chart, the MDAX stock has known only one direction in the last few weeks: short. After the prices formed a high in February, they then yielded bit by bit and formed a clear downward trend. The announcement of the payment of the punitive US tariff duties led to strong sell-offs once again and a confirmation of the downward trend with the break of the SMA 200 line.
Three attractive targets are available for potential profit takings in the daily chart, at 30.00 EUR, 27.50 EUR and 23.00 EUR. At the moment, the value is hanging around below the 200 average, which is now taking on the role of a significant resistance.
In the hourly chart, at this point, one can search for a subordinate signal in order to plan a short entry.
Clear trends in the hour
The trends of the subordinate hourly chart are easily recognizable; a clear signal would occur with the break of the low at 31 EUR. It would be better for an entry to take place from out of the correction due to a better chance to risk ratio, as displayed by the gray arrow. The stop is located above the last high, currently at 32.50 EUR.
The first profit takings would take place in the first partial sale zone at 29.80 – 30.00 EUR.
Before making an entry, one should take into account the company news as well as news for the overall markets and the activities of the central banks. Important company news will be announced on 15.05.2017 in the form of an interim report for the first quarter. One should also expect a statement from the company on the influence of the punitive US tariff duty on the business figures. Until then, you should at least secure a short position through profit takings.
Entry: Depending on the formation of the hourly trend, between 31.20 – 32.20 EUR
Stop: Depending on the formation of the hourly trend, at the last high (currently 32.50 EUR)
Targets: 1st target zone at 30.00 EUR, 2nd target zone at 27.50 EUR, 3rd target zone at 23.00 EUR
Neither the author nor our company is invested in the securities or underlyings discussed at the time of publishing this analysis.
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