Deutsche Bank: Long-Term Bullish Chart Formation

12/14/05 09:55:37 AM

by Kanwaljit Singh Mauj

Deutsche Bank stock has broken out from an ascending triangle, hitting a new three-year high of $100. It is moving in a channel with an upward bias. Target for the stock in the medium term is $115.

Security: DB
Position: Buy

The psychology behind an ascending triangle is thus; prices have been rising within an uptrend. Once they reach a certain price level, the price reverses or turns back from a level that might have been from a previous high. If price momentum was at a new peak at the time of the initial reversal, then the chances are that the ultimate breakout will be higher. See Figure 1.

FIGURE 1: DEUTSCHE BANK, WEEKLY. The charts suggest that this bank stock is headed higher.

Graphic provided by: StockCharts.com.

The important point is the volume. The volume normally is subdued during the formation of a triangle. Once the price tests its previous high from a reversal, the volume plays a very important rule. At this juncture, however, we do not know whether we have a triangle, a reversal, or something else. If the volume is very high, then the chances are that we might test and cross the previous high convincingly. Once the stock price crosses its previous high backed with volume, chances are it will enter into a new territory and the crossover level will become a strong support for the stock.

The weekly chart is suggesting a breakout (Figure 1). The target for the stock is $115, which is ascertained on the chart, measuring the move preceding the consolidation pattern and adding it on the breakout. The swing started from $76 levels ended at $96 level. The difference of $20 is added to the breakout from the ascending triangle at $96, giving us the price target of $116.

Figure 1 shows prices are on an upswing, crossing its previous three-year high of $96. The chart suggests more upside after a fresh breakout is seen on an ascending triangle. The relative strength index (RSI) is also supporting our study as it has been a zone shift above 50 levels. The average directional movement index (ADX) is also trending upward well above 20 levels.

Kanwaljit Singh Mauj

He is a technical analyst based in Delhi, India, a post-graduate from the Indian Institute of Capital Markets (formerly the UTI Institute of Capital Markets), Mumbai. He follows the Indian markets as well the US markets very closely. He has been active in the capital markets for the past five years.

He is an associate with AGIP Securities, which specializes in money management, index futures, live chat for daytraders, and independent technical analysis consultancy. The company has a big media presence from the likes of CNBC, NDTV Profit, and ZEE Business.

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