Monday, October 3, 2016

Deutsche Bank update. [DB]

In this post I modeled a significant bottom to be put in place for Deutsche Bank [ticker: DB] at around the $10.75 level.  The exact bottom so far is $11.18.

So what's all this crazy talk about a bottom?  Everyone knows that DB is in DS (Deep Shit).  Why would anyone even think of trying to trade the shares of a company which is obviously at such great danger of BK?  Hasn't Merkel said she would not bail them out?  Hasn't the US slapped them with a fine that is very nearly their market cap?

Well, consider this another installment in the lessons of Elliott wave trading.  If you can't read the chart, either double click on it or right click and select view in order to get the original full size chart. 

From the very bottom I count 5 waves up.  That likely means that the bottom is in.  That is why I am writing this post and for no other reason.  Everything else is noise.  All the pertinent news that affects share price is already baked into the chart.

Now, there are a variety of possible outcomes for wave 2. For example, it could already be in.  IF that is the case then we should expect to see a gap (not gaap, DB doesn't know anything about gaap ;  ) up tomorrow.  If that green 2 was in fact simply A of 2 then expect a gap down per the blue path to bottom at the 50 fib ($12.24).

Now consider this: after all these months of DB plummeting  I have never indicated it is at or near a major bottom.  In fact, it was never worth charting to me until now.  And the only reason it has become worth charting is that the Elliott wave count suggests that a bottom is LIKELY in place.  And yes, the key word is likely .  You see, nobody can predict the future with perfect certainty.  Scientists now understand that they cannot predict where matter will be located - they can only predict the probability of location.  This concept underpins our universe and so to think that you can start with uncertainty and then ever end up with anything except uncertainty is a fool's errand (despite the dumb comment in the article that said simply having enough uncertain things can create certainty - ask all of the exploded quants about this or better still, ask the banks about this when their derivatives books all do the impossible and implode at the same time sometime in the next few years...).

In any case, this is what differentiates the bottom and top calls of an Elliottician from everyone else: we don't have an emotional connection to the shares, to the system, etc.  When Jim Cramer screams buy buy buy, he means buy and hold for a higher price.  Why?  Because he has developed an emotional attachment to the shares.  He has a gut feeling.  But what if that gut feeling begins to go against you?  When do you sell?  When do you realize that that gut feeling had more to do with indigestion from that pasta dinner last night than it did with divining the future moves of stocks?  In short, you could go down 10, 20, 30% or more, the whole time with a gut feeling that it is about to turn around.  EWI calls this the slope of hope.  In any case, Elliotticians don't do that.  If our wave count is wrong we will know it directly and then we will stop losses dispassionately and then look for the next entry point.

In order to do this you have to have a set of rules which enables you to know what the chart should do next so that if it doesn't do that then you know that your model does not match what the herd is doing right here, right now.  So let's say for example that tomorrow DB gaps down in the AM.  I would then sit back and patiently count 5 waves down with special attention to the level of the 50% fib retracement.  IF that would happen THEN I would buy.  As soon as I buy, I put in the stop loss.  After all, I would only buy for a reason defined by the Elliott wave principle and if the chart sussequently disrespected that reason then I lose my only reason to hold the shares.  BAM.  Sell them.  Take your 1% loss and then let the chart play out a bit more until another likely EW entry point is found.  As legendary physicist Richard Feynman once said:
It doesn’t matter how beautiful your theory is, it doesn’t matter how smart you are. If it doesn’t agree with experiment, it’s wrong.
 At some point you will find that your stop is not triggered.  Your theory (wave count) turns out to be right and the stock shoots up in value.  You get to gamble in the game with the chance to make big profits but without much similar chance of losing.

I know it sounds like magic or worse but I perform this every day and I now have a growing following on my paid blog site.  My service is only $39.95/month but you can bet that if people weren't getting many times that value in trade timing knowledge that I would have no business at all.  Even rich people are trying to get out of any monthly payments these days.  Those who have joined the team only stay on the team because they are making money.  My service is thus not a consumption item like most online services.  It is a labor multiplication tool for traders.  Its a money making tool.  Feel free to stay tuned to this channel to see how this DB chart model works out.

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