A breakup of the European Union could bring about good buying opportunities in select German equities that will prosper from the nation’s relative strength and financial stability.
Global markets seem to be factoring in a default by Greece, and many analysts are looking for a breakup of the European Union. Several analysts think we will end up with both a northern and southern Eurozone.
The overnight downgrade of Italy’s debt may add further pressure on the European Union, as Italy’s debt costs initially increased. Though I personally do not believe we will see a breakup of the European Union in the financial markets, anything is possible. Germany’s economy is in the best position to take advantage of a breakup and a new German deutschemark should have considerable investor appeal.
For those who are pessimistic about the fate of the European Union, an investment in a German company, ETF, or closed-end fund should make you well positioned.
Chart Analysis: SAP AG (SAP) is a $60 billion German business software company whose main competitors are International Business Machines (IBM), Microsoft Corp. (MSFT) and Oracle (ORCL). (Oracle is scheduled to report earnings after the close today.) SAP peaked at $68.39 at the end of April.
- Last week, SAP made a low of $47.89 and has dropped almost 30% since the April highs
- The 50% Fibonacci retracement support level was broken last week and the weekly uptrend, line a, is in the $46 area with the 61.8% level at $44.22
- The weekly Starc- band is at $43.40
- The weekly on-balance volume (OBV) has held up surprisingly well, as it is just slightly below its weighted moving average (WMA). The OBV staged a major breakout in early January, as it overcame resistance at line b
- First resistance is now at $51.90 with further resistance at $53. There is stronger resistance in the $58-$60 area
Fresenius Medical Care AG & Co. (FMS) is a $21 billion medical company that provides products and services for patients with chronic kidney diseases in Europe, as well as Africa, Latin America, and the Asia-Pacific region.
- FMS is down 12.8% from this year’s high at $80.08 and support at $64 from early in the year (line c) has been tested
- The 38.2% Fibonacci retracement support stands at $62.40 and corresponds with the weekly uptrend, line d. The 50% retracement support is at $57.20
- The weekly OBV is below its declining weighted moving average but is now testing long-term support at line e. The daily OBV (not shown) is trying to bottom out
- There is minor resistance at $71.30 with much stronger resistance in the $73.40-$75 area
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