The DAX index is up by 0.57% today as investors await a key meeting by European Union leaders. Other European bourses are also up, with the FTSE 100, CAC 40, and Stoxx 40 up by 0.40%, 0.87%, and 0.72% respectively.
Will Wirecard remain in the DAX Index?
Most companies in the Dax Index are in the green today. However, Wirecard share price has dropped by 17% a day after they dropped by 66%. As I wrote yesterday, the company has been in trouble since last year when the Financial Times started publishing whistle blower accounts. This led to an external investigation by KPMG, which cleared the firm of any wrongdoing.
And yesterday, the company announced that it was suspending its financial statements for the second time. That is after its internal auditor found that almost EUR 2 billion was missing. In an announcement, BDO Unibank, the biggest bank in Philippines said that it was investigating how the funds went missing. The bank blamed a rogue employee for the loss.
All this brings the question on whether Wirecard can continue being part of the DAX index. For one, its market cap has dropped from more than EUR 24 billion 2 years ago to the current EUR 4.8 billion. This makes it the smallest firm in the index. The other smallest ones are Covestro, MTU Aero, and Heidelbergcement.
Analysts believe that the firm, which replaced Commerzbank could be forced out of the index. If it does, it will be the second company to move out of the DAX after Lufthansa.
Wirecard share price is now at EUR 32.35.
DAX top movers
Apart from Wirecard, the other big movers in the DAX index are BASF, Heidelbergcement, Vonovia, and Continental. Apart from BASF, the rest have declined by less than 1%. On the other hand, the big gainers in the DAX index are Deutsche Bank, Linde, Deutsche Post, Beiersdorf, and Covestro.
The daily chart shows that the DAX index has been on an upward trend since March. This uptrend has been supported by the ascending red line shown below. Also, the price is above the 50-day and 100-day exponential moving average and is slightly below the 78.6% Fibonacci retracement level. As such, baring a second wave of the disease, the index may continue rising as bulls target the next resistance at EUR 12,800.
Alternatively, a move below EUR 11,688 will send a signal that there are more sellers in the market. It will therefore invalidate the upward trend.