German stocks tumbled today as the market remained increasingly worried about the health of the global economy. The blue-chip, DAX index, declined by more than 2 per cent, with all its constituent companies being in the red.
Wirecard problems continue
Wirecard, the payment processor, was the worst-performer in the index, shedding more than 5% of its value. The decline was mostly because BaFin, the financial watchdog started an investigation into the company.
Wirecard, the company that replaced Commerzbank in the DAX index, has been in trouble since last year, when the Financial Times started investigating it. The investigation charged the company with inflating its financial results. It also highlighted its overseas partners, where it does not have a banking license.
The revelations led to an investigation by KPMG, the accounting company. In results published last month, the company said that it had found some barriers during its investigation. As a result, a number of prominent investors asked the CEO to resign.
DAX best and worst performers
As mentioned, all companies in the DAX index were in the red today. Other worst-performers were MTU Aero, Deutsche Bank, Continental, and Volkswagen. All these dropped by more than 3%. The best-performers were Lufthansa, SAP, Bayer, and Vonovi, all which dropped by less than 50 basis points.
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DAX Index technical outlook
On the daily chart, we see that the DAX index has found significant resistance at the 50% Fibonacci retracement level. We also see that the index formed a small hanging man pattern on Monday followed by another decline yesterday. Further, the index is still below the 50-day EMA. Therefore, if the index ends the day in the red, it will mean that sellers are in control. As such, it will raise chances of the index retesting the 38.2% retracement level at 10,181.
On the flip side, a close in the green today will cancel the three black crows pattern that is forming. This action will send a signal that there are still buyers in the index, who will be keen to push it above the 50% retracement level.
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