This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Don't Bank on Bank Stocks, Just Trade Them

NEW YORK ( TheStreet) -- Bank stocks have been one of the top performing industries over the past twelve months, and this can be measured by the performance of the PHLX KBW Banking Index (BKX).

The BKX is up 52.3% since bottoming in October 2011, and is up 25.9% so far in 2012, while the S&P 500 is up 34.1% since October and 14.6% year to date.

The BKX has been technically overbought on its weekly chart since the week of Sept. 7, and the finance sector is overvalued by 13.2% according to ValuEngine .

Bank stocks have benefited from the quantitative easing moves, and on the slow and steady improvement in the banking system that I wrote about in The Banking System's Slow, Stressful Recovery on Sept. 4.

If the "QE Fatigue" I discussed last Friday in QE Fatigue Plagues Transports, May Be Contagious spreads to the money center and regional banks, the downside risk is significant.

I discussed some of the issues facing the banking system on Sept. 5 in 'Too Big to Fail' Money Center Banks Still Face Stress and because of these concerns investors should not be greedy and book some profits now.

Traders of bank stocks should continue to employ a "buy and trade" strategy, but be aware of the downside risks among the eleven components of the BKX I profile today. I last profiled five of these banks on Aug. 15 in Time to Book Profits in Financial Stocks: Opinion.



Chart Courtesy of Thomson/Reuters

The daily chart for the BKX (49.58) shows declining momentum with the 21-day, 50-day and 200-day simple moving averages at 49.11, 47.38 and 45.46. My quarterly and annual value levels are 46.03 and 42.98 with a weekly pivot at 50.70 and monthly risky level at 52.99 versus the year to date high at 52.11 set on Sept. 14 in reaction to QE3.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
ZION $27.48 -0.45%
BAC $15.56 -0.51%
BBT $37.60 -0.48%
C $52.80 -0.19%
FITB $19.65 0.56%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs