Upward trend broken, new low for the year and no resistance from buyers: the Nemetschek share has delivered a clear short signal. And the bear camp would have good arguments to keep pushing the stock.
The first quarter of 2022 went perfectly, and according to the plan, the full-year forecast was confirmed. Not many companies provide such positive news at the moment. Nevertheless, market participants do not trade here, do not see the shares of the developer of construction and architecture software as a “safe haven”. The reason:
Now traders are looking at the valuation … and it’s still too high
The stock is unusually expensive by price-to-earnings multiples. This is far too high when compared to current and expected growth in corporate earnings. If the company’s own outlook is correct, Nemetschek should earn about 15 percent more this year, and analysts also see this magnitude for 2023 and 2024. Typically, the P / E ratio is calculated as double the average percentage of current earnings growth and the next two years of expected earnings growth, which would give a P / E ratio of 30. But assuming the expected profit for 2022, it is 48. A price / earnings ratio of 30 would only exist if the share fell to 41 euros.
The Nemetschek share had now been listed much higher in recent months and was one of the best on the German stock market in 2021. And since the P / E ratio was much higher, no one cared. So why now?
This is a typical phenomenon: as long as the bull market is running, almost no one cares whether the valuation is too high or not. But alas, the boom tilts and the trend breaks. Then the focus is on valuation, and suddenly what seemed cheap at higher prices is too expensive. And the fact that Nemetschek is now being viewed critically at buyers suddenly looking at it as a “hot potato” that they would rather not touch is evidenced by the chart image.
Answers to quarterly figures sold out … and the bulls do not show up
The above quarterly results, released on April 28, led to a sharp price increase that day. But already the following day, this price increase was massively sold. And since then, the stock has been under strong pressure and there are no signs of resistance. And this despite the fact that it was about important diagrammatic technical supports that had to be held:
Source: marketmaker pp4
On the second day of sale, the price fell back to the medium-term uptrend line established in March 2021. This line of EUR 71, together with the lowest of the year so far, marked in March at EUR 68.40, formed the crucial cross-support in the medium term. Nemetschek dabbled sideways in this zone for three trading days, but buyers simply did not want to come back. That led to a trend break Friday. And you see: there was hardly any resistance there either, the stock closed close to the daily low. A characteristic short signal.
You have to be careful here, Nemetschek is fleeting
In the last few weeks, this share has first increased by about 11 percent, and then decreased almost 22 percent at a rapid pace. It shows how volatile Nemetschek is. And, of course, it can not be assumed that the stock’s decline will continue as a dash. Counter-movements can occur at any time, which are also strong in line with the previous descent. Therefore, if one wants to execute this short signal, one must operate with a fairly conservative level of leverage to ensure that one can set a meaningful stop loss without risking more than appropriate.
For this purpose, we have chosen a knock-out certificate from the issuer UniCredit, which currently has a leverage of 2.56. Base price & KO threshold is 89,732 euros, maturity is unlimited. The WKN for this short certificate is HB5EX4. Based on the short certificate, we would set the stop loss at EUR 1.59, which would equate to a Nemetschek share price of around EUR 74.50.
PS: reference to the short trading opportunity on SAP
On Friday, SAP shares fell dynamically below the lows of the past few weeks. We advise those who implemented the SAP Short trading opportunity on April 25 to seize the opportunity and follow the stop-loss of the WKN JX6AKS card certificate at the entry price!
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Important chart marks:
Resistances: 68.40 euros, 69.58 euros, 82.30 euros, 94.78 euros
Supports: 54.64 euros, 50.95 euros
Knock-out certificate card on Nemetschek
|basic price||89,732 euros|
|KO threshold||89,732 euros|
|Type||Knock Out certificate card|
|Stop Loss Certificate||1.59 euros|
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