Why Siemens Share Price is Falling

In the stock market, fortunes can be made or lost within the blink of an eye. The rise and fall in stocks often have captivating stories waiting to be told.

One such story that has been unfolding over the past year is about Siemens, a prominent player in the railways sector.

Shares of the company have rallied remarkably, leaving investors delighted. The rally came on the back of the government's unwavering focus on the railway and infrastructure sectors.

The order book of the company has been growing because of the shift in government focus.

In January 2023, the company won the biggest-ever railway order. of around Rs 260 billion (bn).

However, as we all know, markets are subject to twists and turns. Siemens, despite its earlier triumphs, has now found itself in a challenging position.

In the past two days, shares of the company have fallen over 15%. The price fell around 5% last week on Friday and continued the downtrend today by falling 10%.

Let's find out why...

Why Siemens share is falling

#1 Selling motor business to parent firm raises concerns

Last week, Siemens informed exchanges that it will sell and transfer its low voltage motors and geared motors businesses to Siemens Large Drives India, a subsidiary of Siemens AG.

This will be with effect from 1 October 2023 and for a cash consideration of Rs 22 bn.

The company is making this sale as Siemens AG intends to carve out the low voltage motors globally into a separate company.

The motor business contributed around 7-8% of Siemens revenue as of the year ended September 2022.

Industry experts have raised valuation concerns and say that this deal is valued lower than it should. They also say this deal might not go ahead as Siemens needs minority shareholders as well as SEBI approvals.

For now, all this is speculative, but we'll get to know more in the coming days.

#2 Profit booking

Another reason why the stock is under pressure is because of its valuations.

A company's share price often falls even after it posts good quarterly numbers as investors rush to book profits. They could be of the view that all the positives are factored in.

Profit booking is a tendency of the stock market. In multiple cases, you would see a stock coming down after rallying sharply.

Take the case of Hindustan Aeronautics (HAL). Shares of HAL rose over 66% in the last one year. On 13 March 2023, the stock hit a new 52-week high. HAL's share price was on a bullish run, due to a growing order book and increased focus of the government on self-reliance in the defence sector.

But the stock came under pressure after hitting its 52-week high price in March 2023. Within 10 days, HAL shares fell 13% despite strong growth prospects.

This is an effect of profit booking. Investors who think the stock has run its course and will likely stay in a range for the time being, will exit the stock.

The same seems to have happened with Siemens.

Siemens share price falls but technical charts indicate an opportunity...

We reached out to Brijesh Bhatia, lead chartist at Equitymaster, for his view on Siemens. Here's what he shared...

Siemens Ltd, a leading global technology company, has caught the attention of traders and investors as it hits the lower circuit of 10% for the day.

After hitting an all-time high of Rs 3,938 on Thursday, the stock fell for a straight second day with 4% and 10% respectively on Friday and today.

The technical charts reveal an interesting development. The stock is currently trading above its long-term support line, signalling a potentially bullish trend.

Analysing the technical charts

When it comes to technical analysis, the concept of support and resistance levels plays a crucial role. Support levels are price levels where buying pressure typically exceeds selling pressure, causing the stock to rebound.

On the other hand, resistance levels act as price ceilings, preventing the stock from rising further. In the case of Siemens Ltd, the focus is on the long-term support line.

Siemens Ltd Weekly Chart

 

The 36 month's long-term trendline (black) connects significant the low points of May 2020 to the low of May 2022. It extends to the current period too, signalling an intact bullish trend on the chart. The stock is trading above the line after the deep cuts in the last couple of trading days.

It represents a level at which buyers have consistently entered the market, indicating a strong level of demand. A stock trading above its long-term support line suggests that buyers are stepping in at higher prices, reinforcing the bullish sentiment.

The resistance-turned-support line (blue) is placed right at the confluence of the trendline adding a layer of support zone on the chart.

Additionally, the stock is also trading above the long-term exponential moving average of 50 weeks.

The 50-week EMA is often considered a significant level of support or resistance, depending on the direction of the trend. When the price of a security is above the 50-week EMA, it is generally seen as a bullish signal, indicating a positive trend.

Implications for traders

For traders, the fact that Siemens Ltd is trading above its long-term support line presents an intriguing opportunity.

It indicates that the stock has sustained buying interest, which could potentially propel it to higher levels. Traders who recognise this pattern, consider taking long positions, anticipating further upward movement in the stock price.

It's important to note that technical analysis should not be relied upon in isolation but rather used in conjunction with other forms of analysis. Fundamental factors, such as company news, earnings, and market conditions, should also be considered to make well-informed trading decisions.

Conclusion

The stock trading above its long-term support line opens up several potential opportunities for traders. First, it may be an opportune time to enter a long position, taking advantage of the bullish sentiment and potential upward momentum.

Second, traders could consider setting stop-loss orders slightly below the support line to protect against potential downside risks.

If you're interested in being part of Brijesh's charting journey as he shares how to create wealth from the profitable trade setups, join his telegram channel - Fast Profits Daily. You'll get access to the best trading ideas in the stock market.

About Siemens

Siemens is the flagship listed company of Siemens AG in India. Siemens AG is a German multinational conglomerate corporation and the largest industrial manufacturing company in Europe.

Siemens Ltd is a technology company focused on industry, infrastructure, digital transformation, transport as well as transmission and generation of electrical power.

The company has been present in India since 1867, when Werner von Siemens, the founder of the company personally supervised the setting up of the first telegraph line between Kolkata and London.

To know more, check out Siemens financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...