Deutsche Bank share price: rebound short-lived amid restructuring

Deutsche Bank to cut 18,000 jobs

Deutsche Bank has been the big story of the morning, as a new week starts to the news that the struggling German bank will cut a colossal 18,000 jobs in a bid to become profitable once again.

Much of this can be attributed to the shift out of the global equities operations side of their investment banking business, leaving Barclays as the only European bank to challenge US giants such as JP Morgan and Goldman Sachs.

Is the restructuring a good thing for investors?

For investors this brings mixed emotions, for while this cost cutting exercise heightens the chance of future profitability, it also removes one of the most exciting parts of the business. By exiting their global equity business, the bank is shifting away from a sector which has the potential to bring huge profits if things go their way.

Thus, we are moving into a phase which will be transitional, yet hopefully brings an eventual return of steady profitability. Remember that it is not cheap laying off 18,000 staff from the area of the business which has some of the highest wages. This process will not be immediate, and thus the gains we have seen are as much a reflection that the company has a plan rather than the perception that we will see the firm turn around immediately.

With the chief financial officer (CFO) stating that there was ‘significant uncertainty’ over whether the firm will break even in 2020, it is clearly a long-term play. However, with the firm posting losses in four of the last four years of trading, the prospect that they could start to turn things around certainly provides an element of hope.

Deutsche Bank share price shows two sides to the story

While the week is young, the volatility seen today is reflective of the two sides to this story, with the initial positive gap higher being eroded entirely. The weekly chart highlights the recent rally into trendline resistance, set within a clear long-term downtrend. That bearish pattern remains intact for now, with a break through €8.15 required to bring about a bullish outlook for the bank.

On the daily chart, we can see that the price came close to reaching the 76.4% Fibonacci retracement this morning, with recent gains seemingly providing us with an opportunity to look for shorts in a continuation of the long-term downtrend. However, while this trend remains in play, the fact that the bank has a plan in place allows for some form of hope for a more stable share-price in the future.

Could the Deutsche Bank downtrend come to a close?

Certainly, a break through €8.15 would boost hopes that this downtrend is going to come to a close, yet with the stochastic turning lower it looks like we could be due another reversal as accompanied by a momentum breakdown. Given that the most recent stochastic swing low comes alongside the 80 threshold, a break below that would add greater confidence to the bearish trend coming back into play.