Chart of the week: I expect this bank share to double in value

by John Burford from interactive investor |

Share on:

It appears that shares in this leading bank have hit their low and are beginning a recovery. 

Is Deutsche Bank about to return from the dead this year?

There are very few pundits that have had a good word to say on Deutsche Bank (XETRA:DBK), a major German bank. It is not hard to see why, as they have made negative headlines amid reports that high-risk derivatives were dumped on clients to generate large fees. The pressure on salespersons was high in the era of negative interest rates - as it still is.

Income from trading has fallen and investors cannot see how this could change in the near term. But if bond yields are indeed rising (as I have been pointing out in recent COTWs), the same dynamic that is pushing up UK bank shares (Lloyds Banking Group (LSE:LLOY) and Barclays (LSE:BARC), which I have highlighted recently) should be at work with Deutsche Bank.

And that is why I am looking at it very favourably to add to my Buy Low/Sell High list, since bullish sentiment is on the floor and the share price is extremely low.

Here is the big picture on the monthly:

Source: interactive investor. Past performance is not a guide to future performance.

The key feature is the three down off the major high in May 2007 at €108, accompanied by a very large momentum divergence. The shares have only now pushed above the pink downtrend line to help confirm the low is very likely in at the 'c' wave low at €4.40 at the Corona Crash low a year ago.  

But how the mighty have fallen! That is a decline of 96% in 14 years - and destroys the main prop behind a universal 'Buy and Hold' investing policy.

Here is the weekly chart on recent trading:

Source: interactive investor. Past performance is not a guide to future performance.

This chart displays another huge momentum divergence and also a rounded 'saucer bottom' – both of which usually herald a very sharp reversal once the low is in. And the Corona Crash low a year ago should be the final selling exhaustion that usually appears at the end of a very long bear trend.

My first major target is the €20 area. After that, I have targets at around 38, 55 and 70 euros over the next phase that should last many months, if not years. Latest trade is €10, and only a sustained move below the €7 level would cause me to amend my stance.

I am adding it to my Buy Low, Sell High list.

John Burford is the author of the definitive text on his trading method, Tramline Trading. He is also a freelance contributor and not a direct employee of interactive investor.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

get more news and expert articles direct to your inbox
Sign up for a free research account and get the latest news and create your own Virtual Portfolio