Blow Off in Super Regional Banks likely….
Over many years of analysis of stock performance in relationship to its fundamentals the conclusion was that there was no rhyme and reason to what made some stocks perform or not, based on a huge amount of different criteria and testing. What became clear was that is was Sector Rotation or as I like to call it Pass The Parcel that dictated when stocks moved up or down. In other words stocks and sectors become fashionable and unfashionable in what is an endless Merry Go Round. That is all well and good but still left the puzzle of how this could be predicted to begin. I had to find what was fashionable and wait for sell signals and what was unfashionable and wait for buy signals.
The first steps were to create Studies and associated code that was sufficiently rare in order to be meaningful, as the world of stocks is thousands of instruments. This contrasts sharply with other asset classes where my daily scans across the globe cover only 120 instruments. In global stocks and Etf’s it is 7,500.
Less is more could not be more apt, so it required a different approach to Futures and FX. In previous articles we have talked about the building blocks and foundations which are true measure of support and resistance created by Peak Energy and Expansion HERE
Now we move onto the studies called PowwerPlay and Slammdunk. Stocks by nature often spend a great deal of time doing very little or just tracking the overall movement of the Index. PowwerPlay (positive) and SlammDunk (negative) find days of out of the ordinary behavior and mark the bars or candles accordingly. These days can be further qualified as Breakouts or Reversals and are marked by Green or Red Squares
Banks – Super Regional has been the number 1 sector for many weeks now along with other sub bank sectors that have been in the top 10 since the election. They have led the charge higher and as noted a few weeks ago on our Analysis of Fianncial Stocks and ETFs HERE
They are in the height of fashion and become what is called a crowded trade. This was highlighted during earnings season when even if a stock beat market estimates the stock failed to rally. If they missed like NTRS they fell sharply. On Wednesday many banks gapped higher and soared to new highs in the wake of the Presidents comments, only to reverse those gains the following day. The correction was of sufficient velocity that many produced a SlammDunk signal as the charts show below. This acted as the first warning shot across the bows.
This expansion of range this past week means that it is highly likely that in the coming weeks these stocks will create resistance based on their own momentum and highlights the proactive nature of Trade Safely indicators. When this occurs it will provide a reference and timing point for Banks to become unfashionable and under-perform. We will be watching and updating when that occurs. Note that most stocks still have all the lines that were below price when the breakouts occurred at the same spot. This is what we will be watching to see if they move to the top of the trends.
The Banks stocks are listed in there Market Cap order.
PNC Fincl Svcs
Sun Trust Banks
Fifth Third Bancorp
Northern Trust Corp
Huntington Bank Shares
SVB Financial Group
Please note this is general advice from Trading Safely for all our clients and has been prepared without taking into account your personal objectives, financial situation or needs. If you do wish to consider acting on our information please contact a licensed financial advisor to discuss the appropriateness of this recommendation for your own personal financial circumstances. Please obtain any relevant product disclosure documents before deciding to invest. Trading derivatives, stocks and CFDs can lead to losses greater than your deposit.