Don’t Listen to Bankers, Its Their Stock Saying Buy the Market
- Posted by Greg Harmon
- on February 1st, 2012
Traders focus on the minutia of the market or a particular stock most often. It is their job to work in a short term price driven environment. Those that follow technical analysis learn early that the market is like a fractal. You can parse it down to the time frame that suits your trading style and see the same repeating patterns and price information that someone with a slightly longer timeframe sees. What does not often happen though is the process working in reverse, stepping further out in timeframe to see the longer term pattern. With January under our belts it is worth doing just that and if you look at the large financial stocks they are screaming for you to buy them. The failure for these names to participate in any substantial rally has been pulled out many times over the last 6 months as an excuse that the broad market will not make new highs. What happens if they do participate? Or better yet if they lead? Take a look at the monthly charts of Bank of America, $BAC, Goldman Sachs, $GS and JP Morgan, $JPM and see what I see.
Bank of America, $BAC
After breaking below 6 and then several times over a 3 month period holding above 5, Bank of America, $BAC, reversed higher in January. It is off to a good start in February one day in as well. The Relative Strength Index (RSI) is now rising off of a double bottom and the Moving Average Convergence Divergence (MACD) indicator is trending higher toward a bullish cross to positive. It has a long way to go to get many excited but a move to the 10.50 to 11 area seems likely from this perspective. That is over 42% higher than it is today. This is the least obvious, so look at Goldman Sachs, $GS. It has the same shape to its chart. Bottoming over a several month period and
Goldman Sachs, $GS
confirming with a move higher in January. This looks headed to the lows of June to July 2010 at 130 as a minimum with the Simple Moving Averages (SMA) up to 140 above that. The RSI and MACD trends higher are longer and a bit more clear on Goldman Sachs. Neither are showing a long term bullish signal but the trend is good news. Finally JP Morgan, $JPM, is the strongest and clearest of the three. It started the move higher in December and is already at the last of the SMA’s. A move
JP Morgan, $JPM
through would suggest a continuation higher to the 46 to 48 area. The RSI and MACD are trending higher here as well with the the RSI ready to cross the mid line towards a turn bullish over 60. Do you believe the story that these banks are telling?
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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.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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