3 Reasons That Bank Stocks Still Suck

There was a giddy euphoria today about the broad market about almost getting back to Thursday’s gap down open on the S&P 500 SPDR (ticker: $SPY). And despite a 3.26% rise in the Financial Select Sector SPDR (ticker: $XLF), there are still many problems left in the Financial Sector. Three reasons come to mind very quickly: Bank of America ($BAC), Goldman Sachs ($GS) and JP Morgan ($JPM). I can hear you saying that pointing out that $BAC is in bad shape is old news. But in an effort to deflect some attention from Henry Blodget, I will include it here, and it gives a good example of what may still come. These problems are a bit easier to see if you pullback and look at longer term monthly charts. Let’s start with $BAC and then move on to the ‘Leaders’ in the financial space $GS and $JPM.

The chart for Bank of America, $BAC, above shows some signs that it may rest or consolidate. It has just completed a Measured Move (MM) lower to the 6 area, down 9 like the move from April 2010 to November, is out of the Bollinger bands and is near the 76.4% Fibonacci retracement at 6.52. But this stall, if it happens, may be a good place to establish a short, with the move lower happening on increasing volume, and with a Relative Strength Index (RSI) that is still pointing lower and a Moving Average Convergence Divergence (MACD) indicator that is about to cross negative. There is support lower at 5 and then 3.55 before the previous low at 2.51.

Goldman Sachs, , $GS, the market ‘Leader’, is also having a horrible August as shown in the chart above. On the monthly timeframe it is also out of the Bollinger bands, but this chart looks even worse that that of $BAC. it is below all of the Simple Moving Averages (SMA) and all are sloping down expect for the 100 month SMA, the RSI is moving lower and the MACD is growing more negative. This looks headed to the 23.6% Fibonacci retracement level at 93.15 after perhaps a pause in the 100-106 range, resistance from 2005.

The other ‘Leader’, JP Morgan, $JPM, has gone from great to gross in 4 months. At the end of April it was testing the neckline of an Inverse Head and Shoulders pattern that if it broke through would yield a target of over 82.50. Now it has negated that pattern with a move below the right shoulder bottom at 34.75 in August. It looks to have some support between the 31.09 and 32.18 Fibonacci levels that it is currently testing but it has clearly fallen below support at 35.50 which has been important many times prior. The RSI is pointing lower and the MACD has just crossed negative adding the downside pressure. Support lower could come int the 26.72-28.07 area and then 23.

These are not bullish stories. You may be able to make a buck or two on short term trades, but make no mistake these charts suggest more bad news in Financials.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

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
Dragonfly Caps Blog