Deutsche Bank AG achtung downtrend

Feb 19th, 2016 – Comment

Been on a ride to hell since January of 2014


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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DB LOGO

Hey Lou!!

Love to hear your reports on AM640!!
Would you  examine Deutsche Bank?
I hear rumblings of something happening and would like to know if I should dump this stock.
Regards,

Tim

 

Hey Tim,

Thanks for the assignment and for your kind words. This will be the first time that I examine the details associated with Deutsche Bank AG (DB NYSE). The stock has been selling off since January of 2014 when it topped out close to $52.50.

The research undertaken on your behalf indicates that there are three main issues that DB has to address. First it needs to shore up it’s balance sheet. At present the banks leverage ration is 3.5% which puts it at the back of the pack for global financial service providers. In 2018 its operations in the United States will have to pass mandated stress tests which will force the company to undertake a variety of actions including raising new capital.

In October of 2015 DB announced the suspension of its dividend for 2016 and 2017 and the closing of operations in ten countries and shedding other assets. The move will see a reduction of head count by some 35,000 internal positions and external consultants.

The next item on the to do list is to generate steady income and finally stay out of the penalty box with regulators. At the moment its estimated that DB has set aside $6 billion to cover legal fees and penalties related to some previous transgressions. You have to hope that management has gotten the message that playing fast and loose has not been a winning strategy.

A check of the charts will add a technical element to your evaluation of this stock.

 

DB

The three-year chart depicts the established downtrend that started in January of 2014 and dragged the shares down to a 52-week low of $14.78 in February of 2016. For the first nine months of 2015 DB was trading sideways in a range with support near $27.00 and resistance at $35.00. The break below $27.00 in November of 2015 set the stage for a waterfall decline in 2016.

In late October of 2015 the MACD and the RSI generated sell signals ahead of the panic selling that ensued.

 

DB2

The six-month chart pulls into focus the bounce off the 52-week low as buyers were attracted by the oversold situation. What is evident is that the move higher has met some resistance near $18.00.

I’m not sure about the rumblings you have been hearing but it seems to me that a lot of the bad news has been baked into this mud pie. Your best approach from here would be to look for trading opportunities. There is no evidence that we can expect a trend reversal in the near term.

 

Next time I’ll re-examine Blackberry Ltd. (BB TSX) for Jim.

 

Make it a profitable day and happy capitalism!

Categories: Banks
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