Chart of the week: I expect this bank share to double in value
It appears that shares in this leading bank have hit their low and are beginning a recovery.
6th April 2021 11:31
by John Burford from interactive investor
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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.
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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.
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