Buy (to) buy Air Liquide and SAP

The European and German stock markets continued their bull market with significant price gains. It’s worth keeping an eye on Air Liquide and SAP in the coming weeks.

Air Liquide and SAP have an appealing technical risk / reward ratio.  (Symbol image)

NAfter the European and German stock markets in the first four months of 2021 continued the bull market that had existed since the corona bear market low (March 2020) with the tailwind of the positive development on the world’s leading stock exchange on New York’s Wall Street with significant price gains , overbought structures have emerged in the medium term. It should therefore come as no surprise if there will be “normal technical consolidations” in the Euro Stoxx 50 and Dax, for example, in the coming weeks.

However, it would be a technical overinterpretation to derive a “sell in May and go away” from the current situation and to forecast a bumpy path on the stock markets for the coming months. When it comes to new investments, however, it should be particularly important not to make procyclical (additional) purchases on individual stocks that have achieved very pronounced price gains in recent months. Stocks that have recently sent new investment buy signals, or those that should move sideways in the medium term, have an appealing technical risk / reward ratio. Air Liquide and SAP should be mentioned here.

In a mega bull market

The French Air Liquide, whose business model focuses on the production, distribution, marketing and global sales of industrial and medical gases, has grown steadily through acquisitions in recent years and is Linde’s main competitor. For both companies, one should not be surprised if the topic of “green hydrogen” will gain in importance in the coming years, both in terms of investments and in production and sales. Air Liquide is and remains a technical example of a European marathon runner (stands for stocks that are in very long-term upward movements and usually reach new all-time highs in every overall market bull market). The share has been in a mega bull market since December 1989 (starting at 10.1 euros), with the more than 30-year-old, central bull market at around 75.0 euros and having little influence on the current technical situation.

Image: FAZ

This mega bull market has so far only been interrupted by small intermediate bear market movements (for example in 2008/2009) and normal technical corrections or consolidations, which so far have always shown a trend-confirming character (upwards). Exactly this technical picture is also shown in the current situation. After the upward acceleration of March 2020 (start at 94.9 euros; Corona bear market low) and September 2020 to 144.5 euros, Air Liquide started a medium-term sideways movement. This is limited by the staggered resistance zone from EUR 141.0 to EUR 144.5 and has so far been of an upward trend-confirming character. Air Liquide, which also paid its dividend in Corona year 2020, currently has a (gross) annual dividend yield of just under 2.0 percent (gross dividend of EUR 2.75; ex on May 17, 2021). With this defensive technical growth stock, it should come as no surprise if the value moves upwards in the coming weeks with a new investment buy signal (generated when jumping over the staggered resistance zone). In this case, the new technical milestone should be around 165.0 euros. Air Liquide therefore offers a dual technical strategy. Establishing a starting position at the current price level. This should be significantly expanded in the case of the investment buy signal.

A new upward trend

After the European Stoxx Technology, which currently includes the 36 leading European technology stocks from the Stoxx 600, only ran with the overall market in the first three months of the year, a relative strength has emerged again in the last few weeks. Part of the responsibility for this is also SAP, which had to accept significant price losses after the announcement of the changed corporate strategy in October 2020 and the resulting market skepticism. From a very long-term, technical point of view, SAP has been in a bull market since March 2003 (starting at 9.95 euros), with the 18-year, central bull market now reaching around 90.0 euros. This trend was also defended during the corona bear market (March 2020; low at 82.1 euros) and the “homemade” price slide in October 2020 (low at 89.9 euros). Within this central bullish trend, there has been an additional 12-year bullish trend (trend line at 105.0 euros) since March 2009 (price low in the financial crisis at the time at around EUR 29.9).

Although this trend has already been fallen below twice, this bullish trend is again of analytical relevance due to the current price development (SAP is again moving in this trend). From a medium-term perspective, SAP – starting from the previous all-time high of 143.4 euros (new resistance zone) – slipped to the already described 89.9 euros (support zone). This was followed by a sideways movement of several months including the relative weakness against the Euro Stoxx 50 and Dax. This sideways movement has the technical character of a (trading) bottom formation below the additional resistance zone around 110.0 euros. Due to the new investment buy signal that has now appeared, SAP is again in a new medium-term upward trend (trend line: 105.0 euros). Regarding the title, the process of coming to terms with the previous relative weakness has only just begun. The overall technical situation signals that SAP has again a price potential up to the resistance zone (140.0 euros – 143.0 euros) in the vicinity of the old all-time highs. The share, which offers a (gross) annual dividend yield of just under 1.6 percent (gross dividend of EUR 1.85; ex on May 13, 21), is thus again a technical (additional) purchase.