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Traders look to buy Germany's correction

German markets are officially in correction territory but some traders are eyeing the latest drop as a buying opportunity.

The country's benchmark equity index, the DAX, is off 11.5 percent from its April 11 highs. Some of the skittishness in Europe has spilled over into other markets, including the U.S. The S&P 500 has fallen 2 percent in the last three weeks.

Yet the DAX, buoyed by the European Central Bank's monetary stimulus, is still up 11.5 percent on the year while the S&P 500 has barely eked out 1 percent.

"If you look at exports in Germany, they have been really strong over the past four or five months," said Andrew Burkly, head of portfolio strategy at Oppenheimer & Co.

With the country's 10-year bund yields back up to nearly 1 percent after coming close to zero in mid-April, Burkly sees some of the wind taken out of the German recovery's sails. Nonetheless, he sees the latest drop as a buying opportunity.

"It's more of a correction within this recovery pattern that we're seeing globally," said Burkly.

The technicals back up Burkly's contention that German stocks, and European stocks in general, could see a bounce, according to Todd Gordon, founder of TradingAnalysis.com.

Looking at the ETF that tracks European shares while hedging against moves in the euro (trading under the ticker HEDJ), Gordon sees parallels in recent moves and with how the stock traded in late 2014 though early 2015.

Similar to its move from December to January, the HEDJ dropped $6.50 since its early April highs. But by February, the HEDJ was above its December highs and rallied around 15 percent over the course of the next two months. For that reason, Gordon isn't particularly worried about the HEDJ and even sees it as a potential buy.

"It's right on track. If you can hold about $62 in this ETF, that is nice pullback," he said, adding that he is also watching the S&P 500's key level of 2,080.

"I'm not bearish until we start breaking through there. So we could have a little bit of short-covering here in the broader averages from these levels."

The HEDJ opened on Tuesday at $62.76 while the S&P opened at 2,079.07.

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