The Charts Say SELL The Bank Stocks
Two days ago, I talked about the banks stocks,
Typically, financial entities like banks, insurance companies, brokerage firm generally benefit from higher interest rates. Increases in interest rates, mean the economy is doing good.
When interest rates rise or fall, it's the short term interest rates that are moving the most. When a Bank issues loans, they are issuing longer term interests rate loans. As short term interest rates rise, Bank margins come under pressure, which affects their profitability.
Earning season kicks off again for the bank stocks this Friday. Thus, we should get some great clues where the Bank stocks are heading next.
But after looking at the charts, I don’t need Earnings to give me any further clues, Banks stocks are setting up for a multi-year SELL.
Bank Of America - Making lower highs on the monthly chart.
Citibank - making lower highs on the monthly chart.
JP Morgan - making lower highs on the monthly chart.
Wells Fargo - dropped from $66 to $50 and struggling to recover.
Three of the four stocks have formed descending triangles on the monthly chart. A descending triangle is a bearish formation pattern. Even if you don't sell the bank stocks, stay away because are charts are suggesting they have further downside.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Published on
by rollandthomas
How do these charts compare to the overall market ex-FAANGs?
I don’t have charts handy, so hopefully this will suffice:
Amazon, Netflix and Microsoft are responsible for 70% of the S&P 500 gains this year thus far. However, the S&P 500 is only up 1.6% and within the S&P 500, the financial sector is down 5.6%. But it’s the macro view that setting up that’s pointing to inevitable pain for the bank stocks.
Volatility is down relative to the 1st quarter, so any bank that has a trading desk has seen their profits down (transaction fees to investor) due to lower volatility.
Interests rates have increased, so more people can’t taking out home loan because they no longer afford to buy a home, thus origination fees are down, thus profits are down.
As the 10 yr/2 yr bond yield spread decreases, this is squeezing bank margins.
As the economy slows down and eventually contracts, banks will be scared to continue to issue loans, thus profits will go down.
Robinhood is finally openimg up coim trades if anyome missed out!