Look for an “explosive”, positive reaction from shares in Deutsche Bank (ETR:DBK) if they break through the 50-day average, said technical analyst Zak Mir in his latest ‘teach-in’ for Proactive Investors.
Looking closely at the price movement of stock in the beleaguered German lender, he said charts have provided some “good guidance” thus far.
“The key thing is the February support line and that explains why the shares bounced off the ten euro level, and why they bounced so hard,” he said.
After a strong rebound on Friday on hopes its settlement with US Department of Justice will be a fraction of the current US$14bn mooted, Deutsche is currently changing hands for €11.57 (up from a low of €9.90).
A level above thirteen euros could spark a more sustained recovery in the shares, Mir said.
“We are in a falling wedge formation, which can be a very bullish one,” he explained.
“The chances are we won’t break the top of that wedge at 13.37 [euro], but if we do, if we break the 50-day average, there will be an explosive reaction.”
Deutsche has been haunted by the spectre of the DoJ settlement, a penalty for its part in the sale of mortgage-backed securities that precipitated the 2008 financial crisis.
A stretched balance sheet and some mind-boggling potential liabilities had some in the market referring to Deutsche as the next Lehman Brothers.
There has been talk of bailouts from the German government and the need to refinance.
None of it played well with financial markets last week.
That said the writing had been on the wall for some time, with the share price almost halved in the year to date.
Story by ProactiveInvestors