DE30 tests neckline of inverse head and shoulders pattern

• European stock market indices trade higher

• DE30 tests neckline of inverse head and shoulders pattern

• Aixtron surges over 10% after recommendation from Jefferies

European stock markets are trading higher on the final trading day of the week. Solid Wall Street session yesterday and upbeat trading in Asia today set the stage for a positive beginning of the European session. However, major blue chips indices from the Old Continent pulled back a bit off the daily highs already. A flurry on GDP reports from EU countries earlier in the day had little impact on the equity markets.

Source: xStation5

German DAX (DE30) found a support at 13,900 pts zone yesterday in the afternoon and began to recover. Index reached a 14,180 pts support zone at the beginning of the European cash session today but has failed to break above so far. This is a key zone to watch as it marks the shoulder line of the inverse head and shoulders pattern. A break above could hint that upward move is about to accelerate with textbook range of the upside breakout from the pattern being at 14,725 pts. This implies a potential 3.5% upside in case of a break above 14,180 pts area. On the other hand, failure to break above may see the index pull back towards the 14,050 pts support. However, this would require a break below the 200-hour moving average (purple line) that has been providing support for the index in recent hours.

Company News

MTU Aero Engines (MTX.DE) reported Q1 results ahead of the session open today. Company reported a 19% YoY increase in revenue to €1.18 billion (exp. €1.15 billion). Adjusted EBIT jumped 52% YoY to €131 million (exp. €118.5 million) while adjusted net income was 60% YoY higher at €93 million (exp. €87.7 million). Free cash flow aws 26% YoY higher at €134 million. MTU Aero confirmed the full-year forecast and still expects revenue to reach €5.2-5.4 billion.

Henkel (HEN3.DE) plunged today following a full-year EBIT margin guidance cut. Company said that, according to preliminary data, it generated €5.3 billion in revenue in Q1 2022 (exp. €5.2 billion). Full-year EBIT margin forecast was lowered from 11.5-13.5% to 9.0-11.0% while adjusted EPS is expected to drop between 15 and 35%. On the other hand, the organic sales growth forecast was boosted from 2-4% to 3.5-5.5%.

Safran, French aerospace company, announced that it has reached an agreement with Airbus (AIR.DE) on supply of aircraft engines, more precisely on quantities for 2024. Earlier Safran opposed Airbus' plan to ramp-up aircraft production saying that current supply chain issues will make it hard to increase engine production and it is still unsure whether post-pandemic bounce in demand will last. However, Safran has said that it is now ready and prepared for Airbus production ramp-up.

Analysts' actions

• Aixtron (AIXA.DE) upgraded to "buy" at Jefferies. Price target was set at €35.00

Aixtron (AIXA.DE) rallies over 10% and is the best performing MDAX member today. Jefferies almost doubled the price target on recommendation for Aixtron, sending the company's shares into the sky. Taking a look at the chart we can see that the stock has almost completely recovered from downward correction started in September 2021 and is approaching all-time highs in €26.50 area. Source: xStation5