Banks stocks have been firming. Yields continue to rise……
The formula is pretty simple. Higher rates mean banks can charge more for loans. And, loans or the lack thereof have been the biggest damper to economic growth over the past eight (8) years. No loans; no growth.
Summary
The IBD50 banks are our focus today, along with a few that have graced its list over the recent past. The reason is simple, as rates climb (and they will) the banks with the best fundamentals and technicals will outperform. If we see obvious “strategy based” signals, then we can ease into them. Take CFG for example, a watch list candidate for the week of May 1.
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Fundamentally, the stock is trading post-EPS. Profit margins are above 25.00% (my threshold) with a PE of 17. Earnings have been increasing and will only get better with higher rates. The rest of the decision making matrix for fundamentally minded investors is below.
Technically speaking, the stock gets 4 out of 5 stars. Bollinger bangs emphasize all of its “star” qualities.
1) Price is above the 9/20ema, with the latter rising at 45° and the close is above support, with major VBP bands (look left) below. 2) RSI is rising, with room to run.
3) MACD is above its signal line and above zero, confirming that bulls are in control. 4) Stochastic turned high, telling us closing prices have been increasingly finding their way into the upper half of the daily range over the past 5 trading days (lagging). The stock will add a star, if volume begins to increase to above average levels. A pocket pivot usually follows, which will confirm the presence of institutions.
Other banks we are following: #1NBN BAC HBAN WFC MS GS
Interesting to note, many wrote off Goldman Sachs, yet the stock is printing an IHS pattern as the right shoulder forms above the bullish 9/20ema cross. Between GS, MS, JPM and WFC, you have a cautiously optimistic outlook confirming banks at this time.
“Centrist presidential candidate Emmanuel Macron maintained his lead on far-right opponent Marine Le Pen ahead of this Sunday’s French election following a televised political debate, 63-34.”
Going into the weekend, we have the French election, with the markets signaling it may remain in this new uptrend. The break out seems imminent, especially if financials lead into Friday and continue next week. If Macron wins, expect new all time highs.
Just a thought. We have shares in CFG and will likely add BAC.
Happy Thursday,
Vinny