Bank on a Rally in Deutsche Bank

 | Jul 06, 2017 | 11:24 AM EDT
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Deutsche Bank  (DB) looks like it has room to rally. It is edging up this morning and is getting closer to a fresh upside breakout. Prices have largely been in a sideways trading range for the past seven months, but this may be ending soon.

A rundown of our favorite charts and indicators should provide some clarity.

In this updated daily bar chart of DB, below, we can see the price action covering the past twelve months. Prices started to rally back in November, with the slope of the 50-day moving average line turning positive. The shorter 50-day average line crossed above the slower-to-react 200-day average line in December for a bullish golden cross. Prices crisscrossed the 50-day average since February, but are currently trading above it.

The daily On-Balance-Volume (OBV) line rose with the price action starting in October -- and only softened slightly in February and March. The bias has turned positive again since April. A rising OBV line occurs when traders are move aggressive, with heavier volume being traded on days when the price of DB closes higher. The trend-following Moving Average Convergence Divergence (MACD) oscillator signaled a cover-shorts buy in late June and looks to be crossing the zero line for an outright buy signal.

In this weekly bar chart of DB, above, we can see both a big decline and a partial recovery over the past three years. After being chopped from $30 to just $10, DB has turned up above the now-rising 40-week moving average line. The chart does not show any significant resistance until we get back up to the $24+ area. The weekly OBV line jumps up starting in September, and then follows the choppy price action. The MACD oscillator in the bottom panel is above the zero line, and could turn up for a fresh go-long signal.

In this Point and Figure chart of DB, above, we can see the consolidation pattern that started in December (the "C" on this chart). A trade at $21 would be an upside breakout and open the way for a potential $36 price target. With chart resistance starting around $28 on this chart, higher price targets will have to wait.

Bottom line: Overall, the charts of DB look constructive and I would trade DB from the long side. Traders could go long here and add on strength above $20 and $21. A decline below $17 would be a signal that this approach isn't working.

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