Y'all Just Bought Deutsche Bank...Aggressively

JC Parets
January 31, 2020

From the desk of Tom Bruni @BruniCharting

Thank you to everyone who responded to this week's mystery chart, I expected it to be a good one and it was.

Most respondents were aggressively selling this one, while others wanted to see a more decisive move before making a decision.

With that as our backdrop, let's take a look at this week's chart. 

The original post is a daily line chart of Deutsche Bank (DB) breaking down below support and beginning to move lower.

That chart was inverted, meaning the original was actually a bottoming formation in Deutsche Bank...which yesterday reported earnings and accelerated to the upside. We've liked this stock for months given the strong base it's built over the last year in the face of bad news/press and ZERO buy ratings from the Analyst community for the first time in the stock's history. For us, that signaled that a long-term bottoming process was in place and now we're getting confirmation of that.

Click on chart to enlarge view.

Here's the stock also breaking out relative to the rest of the European Financials (EUFN) subsector. Definitely a change of character.

Another aspect of this story that I find interesting is Germany trying to turn a corner relative to the Developed Ex-North America group of stocks. With Deutsche Bank being one of the most important stocks in Germany, its reversal poses one less headwind for the DAX to overcome and vice-versa.

Playing devil's advocate here, I think it's important to highlight one of the data points that's been in favor of the bears for most of 2019. That is European Banks stuck below former support relative to the rest of the STOXX Europe 50. It's managed to stabilize and is working through all the overhead supply, but really needs to get back above that level. An improvement in Deutsche Bank is a start, but it's gonna take a little more participation for it to really get going (especially if Rates continue to fall).

The Mystery Chart exercise is one of my favorites because it does a great job of revealing people's biases (my own included). If I had posted a chart of Deutsche Bank on its own I doubt the number of positive responses would've been the same, but the Mystery Chart allows us to focus purely on price action without all of our other feelings distracting us.

Deutsche Bank has been, and remains, on the mend. As long as prices are above $8.00 in the US-listed ADR, the bias is higher towards 11.65 and 14.80. Let's see if this thesis continues to play out.

Long live Deutsche Bank (at least for now).

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Allstarcharts Team

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