Shares of Deutsche Bank AG (DB) are about 10% lower in early trading Friday as traders react to a spike higher in the bank's default insurance rates. Reports noted that the bank's five-year credit default swaps jumped to 173 basis points late Thursday from 142 bps in the previous session.
Let's look at the charts of the equity.
In the daily bar chart of DB, below, I see a weak technical picture. Share prices rallied from an early October low but the trading volume declined on the advance -- not what old-time technical analysts like to see. Volume should expand in the direction of the trend.
The peak came quickly at the end of January. DB turned lower and has broken below the 50-day moving average line and its slope has turned negative. DB has continued lower and broke the 200-day line the past week.
The On-Balance-Volume (OBV) line shows weakness from early February as traders have become more aggressive sellers. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish alignment below the zero line.
In the weekly Japanese candlestick chart of DB, below, I see a bearish setup. The shares have declined below the 40-week moving average line and its slope is now negative.
The weekly OBV line is pointed down. The most recent candle pattern has a large upper shadow showing that traders have rejected the highs. The MACD oscillator has crossed to the downside for a take profit sell signal.
In this daily Point and Figure chart of DB, below, I can see that prices are in a downtrend. DB has reached and exceeded a downside price target in the $12 area.
In this weekly Point and Figure chart of DB, below, I can see that prices are in a down column of O's. It shows an upside price target but a trade at $7.00 will turn this chart very bearish, in my opinion.
Bottom-line strategy: Traders are acting like traders -- sell first and ask questions later. Shares of DB are likely to stay under selling pressure. Avoid the long side and do not try to catch a falling knife.
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