I have made several comments about DB as being a ticking time bomb for the markets. Well it went POP! Now I need to be more specific.
The problem is obviously liquidity. Not capital. Can they get it? YES! But at what costs? Go to the ECB? Market will punish them for it. Bail in? Oh! Boy! Don’t think so! Go to the state? Most likely. Not sure what the laws are exactly. But this is Germany we are talking about. So all bets are off. Do I think it will go to zero? NO! I have used the term loosely cause I don’t like them very much not because I think it would actually fail.
The reason the market is going down makes me bullish on stocks. Once the issue is resolved we will get a big pop in the markets. No question about it. But we will have to suffer a bit of pain before we get paid. That is fine, because we are going into it knowing this. Just like we do with all trades. Position size is the key to being chilled!!!
Now the for the important question, what is the move worth and when to buy? Is this news worth a 3% decline or a 5% from the all time highs? A 3% will hit the ascending trend line, 5% breaks it and technicians will schitt them selves with greed and pile in. That would be a nice move down to get long. When there is greed everywhere. Buying at a 5% decline and maybe suffering for another 1% down is not unreasonable. At the same time it fulfills the little roof pattern bear signals, Bulls will than get their shorts to squeeze and everyone is happy. 😉
As of now this is the strategy. Subject to change.
Author Jim Boukis