Deutsche Bank Technical Analysis: 'European Banks Are Pricing In A Major Recession'

While the major indexes have distanced themselves from their mid-June lows, one sector has not: the financials and more specifically the big banks.

JPMorgan Chase & Co. JPM and Bank Of America Corp BAC made new lows for the recent slide on Tuesday. What is concerning is that in theory banks are supposed to move higher in a rising interest rate environment. 

It is not only the U.S. banks that are in the gutter, but the European ones as well. One of those banks is the PreMarket Prep Stock of the Day, Deutsche Bank AG DB.

Deutsche Bank Cut In Half: On Feb. 10, shortly before Russia started the war in Ukraine, Deutsche Bank peaked at $16.70.The stock made a new low for the move on Wednesday at $7.82 as of 1:30 p.m. EST. That matches its September 2020 low, and the next monthly low is down at its April 2020 low at $5.79.

PreMarket Prep's Take: The reason for the weakness was discussed and future implications were discussed on Wednesday’s "PreMarket Prep" show. Dennis Dick stated: “Obviously, the European banks are pricing in a major recession.”

Dick discussed the overall impact of the European markets on the U.S. markets using Tuesday’s price action as an example.

“The after-hours has been quiet as of late, but the real late fireworks begin when Europe opens,” he said. “Once again, the banking sector is really taking cues from the European banks.”

Referring to Tuesday’s price action, Dick noted that a major part of Tuesday’s rebound took place after the European markets closed.

As seen in Wednesday’s price action, the negative price action in the overseas banks is dictating the early price action in the U.S. banks. For example, Bank Of America and JPMorgan both opened lower, tested the close and ended the session in the red. 

Technical Take: The author of this article noted that Deutsche Bank did bottom in the current area (under $8), back in September 2020. Instead of trying to purchase the issue on its weakness, it may be more prudent to let the issue establish a few lows in the same area and move away from it, then consolidate and attempt to make a move higher.

Deutsche Bank closed 2.81% lower Wednesday at $7.95. 

The full discussion on Deutsche Bank can be found here: