We have all watched the continuing drama known as Europe. Some have called what is happening over there a slow motion train wreck.
Right now, the European market is the tail that wags the dog, meaning peace and calm over there translates to higher prices in the U.S equity markets.
BRACE YOURSELF
Over the last month we haven’t seen the apocalyptic headlines that were streaming every hour like we did a month ago. I guess “no news” is good news. But, I do believe that this temporary calm is just that, temporary. In the past I have been long EPV which is an ETF that gets you short Europe, but right now I am initiating short positions in Deutsche Bank (DB).
I believe the U.S market is getting slightly overbought and due for a small correction, but some of the action that I have seen in Europe, both in ETF’s and individual stocks seem a bit overdone to the upside.
THE TRADE
DB has traded from $32 at the end of November to $44 where it trades today. The stock has recovered nicely, no doubt about it, but if there is any negative news at all from Europe in general or Germany specifically we could see a fairly decent downside move.
This is a contrarian trade for now, but the stock is approaching its 200-day simple moving average. I am short here with a stop above the 200-day moving average up around the 46.50-47 level.
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