In Every Custody Battle There are Winners and Roadkill

Everyone reacts to situations differently. Some can handle adversity and some cannot. We got a measure of that today when the 3 largest custody banks The Bank of New York Mellon (ticker:$BK), Northern Trust (ticker:$NTRS) and State Street (ticker:$STT) reported earnings. These were all overshadowed by the report from the Vampire squid (Goldman Sachs) so I will summarize here: State Street beat and Northern Trust and BONY-Mellon missed. But it is the reaction and how that impacts the charts for the future that is important in measuring character.

The Bank of New York Mellon

BK had been falling since the beginning of April. There was hope coming into the report after it printed a doji candle on Monday. These candles are often referred to as potential reversal candles, but more properly they reflect indecision. Well, that indecision was resolved quickly to the downside. BK now sits at an interesting place. It is on support at 28.15 exactly midway between the channel, 24.00-32.35, where it has traded since the March 2009 lows. The Relative Strength Index (RSI) is steeply pointing lower, the Moving Average Convergence Divergence (MACD) indicator is growing more negative and the Bollinger bands are expanding. Under 28.15 BK has support at 26.50 and 24.90 before the bottom of the channel. Should it hold then 29.75 – 30 is resistance. Like the teenager hearing of a divorce, a bad reaction and prospects, but still sinking in, could be worse.

Northern Trust

NTRS had also been falling into earnings but only for a few days on the latest leg in the downtrend from January. There was also hope prior to earnings for a reversal higher as it printed a Hammer candle on Monday. But this stock took the news of an earnings miss like a 5 year old might upon hearing that one parent NEVER WANTED TO SEE THEM AGAIN. The price raced lower all day and closed on the lows printing a Marubozu candle. The RSI cratered and the MACD crossed down, both on massive volume comparable to, oh yeah, the last earnings report and huge gap down day in January. Everything points to more downside in this chart, with the exception that it is outside of the Bollinger bands, so it may consolidate or slow down to allow them to catch up. 47.38 and then 46.50 are the next levels of support before a full retracement to 44.55 of the move higher from September to January. If it bounces somehow them 49.13 and 49.50 are the first resistance levels.

State Street

STT was the lone beat of earnings of the three. It also had signs of a potential reversal from Monday’s Morning Star candle. Post earnings STT did move higher and traded much higher during the day until closing with a bearish Shooting Star candle. Since the Shooting Star is not following an uptrend it has a lot less weight, but it does show bearish intraday price action nonetheless. The move ended up holding over the 100 Day Simple Moving Average (SMA) and just under the 45.87 Fibonacci level marking the 23.6% retracement of the move higher. It also flipped the RSI to a positive slope, reversing off of the mid line. The MACD is diverging though having crossed lower. If it can continue to hold the 100 SMA then there is resistance higher at 47 and then 48 before the long term support/resistance line at 49.15. If it loses that support then look for support lower at the rising trend line near the 38.2% Fibonacci level of 43.28 and then 42 and 41.19 lower. This one is the strong one with the stiff upper lip soldiering on.

Notice how much stronger this chart is than the other two. If custody banks deserve a place in your account which one would you choose?

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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