Our article on March 6th HERE, called a top in Banking Stocks in what was a sector that had led the post election rally as a large number of Stocks posted one of our Trend ending signals we call SlammDunk. This code spots unusual activity and an expansion of range to alert to both Trend endings and Trend accelerations. As it now over a month since that call it makes sense to review where banks stand now as Earnings season for many of them approaches.
Whilst the market overall in that time is down just a fraction and the Nasdaq is actually up, Banking Stocks have seen weakness across the board with all lower by a considerable amount over the same period. This highlights the power of identifying when Sectors switch from being fashionable to unfashionable and gains far in excess of the market performance can be achieved.
From a fundamental prospective the common held logic that higher interest rates promote higher stock prices for Banking Stocks has definitely not held true this time.
First up is Us Bancorp (USB). The reversal came at $55.50 and closed yesterday at S50.78 for a drop of 8.5%. Analysis of the chart shows that as well as a SlammDunk appearing at the highs a second signal 10 days later showed a fresh acceleration of the downtrend. It also showed a break of the Range Relativity monthly support (red dashed line), which was the first move below such a level since the election. This was a fresh negative.
When looking for targets our primarily tools are Energy and Expansion, Range Relativity and Time Area. The first two show that the support lines on the chart itself have not moved for many months with the first still way down at $44.00. However the monthly and quarterly Range Relativity levels provide a closer focus as shown by the red and Purple dashed lines. These target $49.77 and $49.04, the close proximity to each other creating a strong zone of support.
Time Area beneath the chart monitors time up the annual level and currently shows that the Blue and Green Lines (daily and weekly values) are trending down and are currently below the monthly and quarterly levels (Red and Purple) which is a negative set –up. The longer term targets are semi-annual and annual at $45.66 and $44.88 which is slightly above Energy and Expansion and close to the original breakout point that was signalled by SlammDunk’s opposite signal PowwerPlay.
Resistance currently lies at the monthly Relativity point at $52.91 so a close above there would suggest the downtrend was over and signal a profit taking point.
Second is PNC Financial Services (PNC) . This has dropped 7% so far and paints a similar picture to USB but with one major difference. One of our main timing points is when Energy or Expansion levels shift from support to resistance or vice versa. The two circles show that this occurred a week after the first SlammDunk signal which means that resistance has been created based on its own momentum. This is negative and a few days later a fresh SlammDunk acceleration down signal appeared.
Since then the stock has been quiet with near term monthly and quarterly targets at $115.00 and $111.50. It would take a close above the Monthly Relativity point at $124.35 to remove the downward pressure.
BB&T Corp (BBT) has been one of the poorest banking stocks performers slumping nearly 10%. The slide was so steep that it reached its first monthly target two weeks ago as it hit the Quarterly Relativity target at $43.50. Since then price has stabilized and created lower targets as the new month and quarter began at $42.70 and $41.12 respectively. It will require a close above $46.10 to relieve the pressure.
Sun Trust Banks (STI) has been down over 10% and currently is just over 8% in the red. Two SlammDunk signals materialized and with Energy and Expansion far below, the near term targets are at $52.32 and $49.65. Closes above $58.00 signal that the downtrend is over.
Fifth Third Bancorp (FITB) is the weakestof the banking stocks, down over 10% having been lower by over 13% at one point. In common with BBT this also reached a downside target last month at $24.80 for a profit of 11%. Downside targets lie at $22.80 and $23.20 with resistance at $26.59. This also moved resistance to the top of the trend as circled.
Northern Trust (NTRS) somewhat surprisingly has been the most resilient as its Fundamental make up was arguably amongst the worst within its peers, being down only 3%. This never posted a SlammDunk but did move two Energy and Expansion lines to the top of the trend. One reason for its relative over performance was how adjacent last months and quarters targets were. Price moved to that zone and held perfectly as circled.
Huntington BankShares (HBAN) dropped by 12% at one point and is now down 9%. In contrast to the others, support has moved higher as highlighted and this has created a major zone of support with Range Relativity that extends from $12.45 to $ 12.24.
Goldman’s, JP Morgan ,Morgan Stanley and Wells Fargo post results shortly so lets see what they have done and were they lie currently.
Goldman’s is down 8% without posting a topping signal and is waiting for the news. Major support moved higher as shown and price has been sitting right at the level for over a week. Resistance lies at a zone of Time Area and Range Relativity at $238 to $240. It will be interesting if it does what it did on its last earnings and beat the street but go down. Bad News Bad Action.
JP Morgan (JPM) is down just under 8%. This did post a SlammDunk at the highs and then moved major resistance to the top of the trend. It remains under pressure with a quarterly target of $77.80.
Morgan Stanley (MS) is down over 9% having previously reached and then topped out at its Quarterly target. Having done that, the fresh quarter leaves the downside targets distant at $35.20.
Of the major banking stocks, Wells Fargo (WFC) has the nearest and strongest zone of support that extends from $52.03 to $50.79.