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German industrial powerhouse Siemens AG (SI) is trading on the edge of a major breakdown. A week ago, SI stopped just short of retesting levels last seen in early 2010. On Wednesday, SI again came within pennies of that level before bouncing sharply. The weekly and daily charts below show the action…

(click to enlarge)Siemens trades on the edge of major and critical support

Siemens trades on the edge of major and critical support

(click to enlarge)Siemens has narrowly escaped a major breakdown twice in the past week

Siemens has narrowly escaped a major breakdown twice in the past week

Source: FreeStockCharts.com

With Thursday's very poor German manufacturing numbers, I highly doubt Siemens can avoid a plunge through support for much longer. Reuters reported that the Markit's manufacturing Purchasing Managers Index (PMI) dropped to 45.0 for May from last month's 46.2. Anything below 50 signals contraction. This monthly contraction is Germany's worst since June, 2009. New orders and new export orders recorded their eleventh month in a row in contractionary territory.

Germany's service sector remains in growth mode and business confidence remains at its highest level in almost a year. So, there is still some source of hope for Germany's economy even as its neighbors continue to sink. However, I am no longer interested in buying SI at current levels at this moment. Instead, I will wait to see how this important test of support gets resolved.

Be careful out there!

Source: Siemens AG Trades On The Edge As German Manufacturing Continues To Contract