Bayer share price rise – keep an eye on pullbacks

At Tricio we look at charts in order to gauge investor sentiment and behaviour.  Bayer has been a case study in risk trumping optimism ever since their purchase of Monsanto in 2018 saw Bayer’s share price fall, fall and fall again. This was on the back of Roundup (herbicide) lawsuits in the US opening up a blackhole of litigation and payments.

We have discussed Bayer in various ESG columns as a cautionary tale of why ESG considerations can matter for investors. If the view is taken that herbicides can have negative health effects (anyone using a backpack sprayer and herbicides will be familiar with the lengthy warnings in the ‘how to use’ manuals) then it could be argued that Bayer may have dismissed the lawsuits that were filed before they purchased Monsanto a bit prematurely.

However, the news this week that the Trump administration had effectively sided with Bayer in asking the Supreme Court to agree with their arguments on pre-emption, saw the share price rise sharply. The chart (monthly, semi-log with 12 and 60-month moving averages) shows that the 12-month moving average was recovered this summer and that a rally to the 60-month moving average near €41.40 may follow. From a chart perspective, a potential inverse head and shoulders pattern may be forming, with a simple extension targeting the €50 area.

Monthly chart

The weekly chart below (13 and 50-week moving averages, semi-log) shows the break higher this week and the potential basing pattern. A potential key clue here is that the actual turn above the potential inverse head-and-shoulders neckline happened with a gap break higher on 24^th November! The follow through bounce this week also showed a gap break (daily chart, semi-log with 60 and 250-day moving averages, bottom). This makes gap support around €30.50 and €27.60 important to hold on pullbacks. Neckline support is layered near €29.50 in the middle of this area.  

Weekly chart

Daily chart

Bottom line? The Supreme Court may deliver a judgement next year. The suspicion is that there is a long way to go before all of the lawsuits are settled though, as the history of these suggests. Investors try and price in all available information, including making forecasts about possible events. Watch the pullbacks – if seen – to see if demand picks up on lower share prices (chart support) with the neckline and gaps important to hold ahead of some important lows at the €25.70/€24.80 area, ahead of the late 2024 low near €18.41 and the Trump tariff low near €18.37.  Bulls will be hoping that pullbacks are limited in scope, and that an eventual rally towards €55/€61+ will follow to test rising and falling lines on the monthly chart.

Gerry Celaya, Chief Strategist