There’s a lovely English figure of speech which suggests the ridiculousness of something happening: “when pigs fly.” In German, the same sentiment can be expressed by the expression “ich glaub mein Schwein pfeift” which means “I believe my pig whistles.” DB is surely trying, but it’s having a hell of a time whistling a happy tune.
We last visited the stock on March 13 [see: When Push Comes to Shove] when it was threatening to break out of a small consolidating triangle after breaking down below our previous short signal at 11. From the Mar 13 post:
A breakdown from a falling channel is incredibly bearish, but a move back above the bottom of the falling channel (around 9.50) would be net positive. To get there, it will need to break above the red TL and will then face its SMA200, now at 10.32.
A long position with very tight stops would make sense for those willing to roll the dice. However, if it can’t retake the channel bottom, then it remains a dead bank walking and a good short.
Obviously, shorting it in the hopes that the ECB lets it fail would entail some risk. No doubt the ECB is trying to figure out a way to restructure it in such a way that it’ll survive and, ideally, not take the rest of the world down with it. Until then, I think it’ll remain on life support.
As it turned out, the triangle broke down and not up. The stock spent 6 weeks being propped up around $8/share before finally breaking down again and shedding 28% in a nifty little falling channel.
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It finally bottomed at 6.49 in June and bounced back up above 8 where it collided with overhead resistance and is currently backing off in the wake of the latest restructuring news.
Make no mistake about it, DB is in a world of hurt. Given that it’s the 15th largest bank in the world with over $40 trillion in derivatives, its demise could devastate the financial system. Can this pig whistle? If so, is it just whistling past the graveyard?
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