Attached is a chart of Symrise AG, based out of Germany and traded on the German exchanges. I apologize that the chart isn't near as clean as the stockcharts.com charts I usually use, but stockcharts.com doesn't have access to the European exchanges yet (just US and Canada). However, Tradestation is great for use with foreign currencies as will be shown.
I want to talk briefly about the difference between a US traded stock and a foreign stock trading thru its ADR (American Depository Receipt) on the US markets. The ADR for all intents and purposes is the share ownership of the underlying asset. However, the key difference is that the ADR must adjust for exchange rates between the ADR and the home country's security price. The chart above will show you how big a difference it can make!
The top chart is of the Symrise ADR traded in the States. The second chart is the price of the Euro. The 3rd chart is a nice ratio chart essentially converting the ADR back into its home country's currency. The final graph is that of the 20 trading day correlation (1 month).
The one thing I don't like about the tradestation platform for charting is the text which is a pain to use, but other than that it has some wonderful functionality such as the correlation graph that I don't have at stockcharts.com.
Ignoring the text for now, the ADR looks to have completed a 5 wave move up from its June lows and topped in November. Notice similar tops occurred on the spread chart. What is nice about the June top is that occurred at a time the Euro was weakening, so the move from Nov 2009 to May 2010 was actually stronger than the ADR would leave you to believe (as the spread chart helps show).
However the main thing I wanted to point out with this ADR (and likely many others) is the recent correlation. Notice the 20 day correlation is sitting at .60 and has been steadily climbing over the past year and a half. This means that more and more of the ADR's return is actually coming from changes in the exchange rate rather than changes in the company's performance. That is important to note so that you don't confuse the reasons for the stock's returns.
This blog heading's title above links to the German traded Symrise AG on bigcharts.com. I have also copied it below. This is helpful in seeing a longer time horizon of the company since the American ADR just started in late 2008. Notice that early '09 was the longer term price bottom. It also looks like a pretty good impulsive move up. The November top does indeed look like a completed 5 wave top assuming a May/June '09 2nd wave and May/June 2010 4th wave. If so then support could be found in the $20 ADR ($16 German exchange and spread chart) assuming a breakdown below $25 on the ADR.
One final point on the spread chart. Notice its current price of 20.05Euros. Compare this to the bigcharts.com German traded price of 20.14Euros...pretty close and lets us know that we did the conversion correctly. You can also go to this site to look up the German stocks...
http://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/home?module=InOverview_Equi&wp=DE000SYM9999&foldertype=_Equi
Posts
No comments:
Post a Comment