Deutsche Bank (DB)

In early October, I pointed out the extreme in bearish sentiment on Deutsche Bank (DB) and the related overcrowding in bearish bets. After DB surged 14% off its latest all-time low, I decided to hold onto my call options which were a play on a bottom. So far, so good. DB printed a 3.7% gain on October 20 which marked a breakout above resistance at the 50-day moving average (DMA). With trading volume surging to more than two times the 90-day average, I consider this move to be a follow-through to DB’s apparent bottoming process. A new close below the 50DMA would essentially invalidate this conclusion.

Deutsche Bank (DB) follows through on its bottoming process with a 50DMA breakout on strong buying volume.

First Solar (FSLR)

In late September, I explained why I was playing a bottom in First Solar (FSLR). Fortunately, FSLR has yet to look back. The stock took two weeks to complete a test of resistance at its 50DMA. On October 19th, FSLR surged 5.9% on strong buying volume to a new 2+ month high. With additional follow-through the day after, FSLR almost reversed the losses it suffered in sympathy with poor earnings from SunPower (SPWR).

First Solar (FSLR) confirms its earlier 50DMA breakout with a fresh buying surge.

Source for charts: FreeStockCharts.com

The current bottoming patterns in these two stocks demonstrate the importance of extremes in market sentiment and distinguishing the difference between arguing with sellers and celebrating with buyers.