DAX Breakout Signals Strategic Entry Amid Trade Volatility: Target These German Gems

The Frankfurt DAX's recent surge above its 200-day moving average (DMA) has created a rare alignment of technical and fundamental catalysts, positioning German equities as a compelling contrarian play amid global trade uncertainty. Despite U.S. tariff threats and weakening consumer sentiment, the index has carved a bullish path, offering investors a chance to capitalize on undervalued names like Gerresheimer (GHHIF) and Schott Pharma (part of SCHTFF) while sidestepping risks such as HelloFresh's (HFGPF) U.S. exposure. Here's how to navigate the opportunities—and pitfalls.

Technical Setup: A Breakout Worth Chasing
The DAX's closure above its 200-day MA (18,497.50) in early May marks a critical inflection point. As of May 20, the index trades at 23,746.5, consolidating just below the 23,928 resistance—a level it finally pierced on May 19 after weeks of choppy action. Key technicals confirm the bullish bias:
- Ascending EMAs: The 20-day (23,692.8), 50-day (19,251.42), and 100-day (18,808.21) EMAs all slope upward, forming a “bullish alignment.”
- MACD Momentum: While the RSI (57.03) signals neutral momentum, the MACD oscillator's +9.19% reading hints at sustained buying pressure.
- Resistance Turned Support: A breakout above 23,928 (now a support zone) opens the door to 24,200–24,400, with the all-time high of 23,476 long gone in the rearview.

Fundamental Catalysts: Beneath the Surface Strength
While headline Q1 2025 DAX earnings fell -8% YoY, the automotive sector's struggles mask a brighter picture elsewhere. Excluding autos, profits rose +4%, with full-year 2025 forecasts at +4% and +13% for 2026—outpacing broader European markets. This resilience, fueled by industrial and healthcare sectors, suggests German firms are weathering trade headwinds better than perceived.

Pick the Winners: Gerresheimer and Schott Pharma
- Gerresheimer (GHHIF): Acquisition-Driven Growth
The pharmaceutical packaging leader has delivered +12% revenue growth in 2024, driven by its acquisition of Schott Pharma's glass vial division. With a P/E of 18.4x vs. the DAX's 20.1x, its valuation remains attractive. Technicals align:
- Shares have held above a $42 support zone, with RSI at 55—neutral but trending upward.
- A $45–$47 breakout would validate a move toward $50, aligning with 2026 EBITDA targets.

• Schott Pharma (via SCHTFF): Surprising Resilience
  Part of SCHOTT Group, the business's glass and pharma solutions have defied trade slumps, with orders up +7% YoY in Q1. Its parent's stock trades at €52, near a €50 support (200-day MA). A €55 breakout would signal a push toward €60, backed by +9% EBITDA growth guidance.

Avoid the Losers: HelloFresh's U.S. Vulnerability
The meal-kit giant's heavy reliance on the U.S. market—60% of revenue—exposes it to tariff wars and inflation. While its German operations hum along, U.S. margins are under pressure. Shares trade at $14.20, near a $13.50 support, but with -12% YoY revenue growth in North America, the risk-reward favors caution.

Risks: Don't Ignore the Downside
- Fed Policy: Dovish comments recently fueled the rally, but rising bond yields (Germany's 10-year at 3.2%) could test investor resolve.
- Consumer Sentiment: The University of Michigan's index dropped to 50.8, near record lows, signaling weak spending power.

Why Act Now?
The DAX's technicals and fundamentals are in sync for a selective long bias. Investors should:
1. Target Breakouts: Use 23,928 resistance as a DAX entry trigger, with stops below 23,600.
2. Focus on Quality: Prioritize firms like Gerresheimer and Schott with acquisition momentum and diversified revenue streams.
3. Avoid U.S.-Centric Plays: HelloFresh's exposure to trade wars makes it a hold until clarity emerges.

The German equity market's resilience amid adversity is no fluke. For investors willing to sift through the noise, the DAX's technical setup and sector-specific strengths offer a roadmap to outperformance—even if the path ahead remains bumpy.

Final Call: The DAX's May 2025 breakout isn't just a chart event—it's a signal to act. Pair patience with precision, and German equities could deliver outsized gains in the months ahead.