NEW YORK ( TheStreet) -- The finance sector is 8.5% overvalued with the banks major regional industry 17.2% undervalued. This is reason enough for investors to like the buy rated banks among the nine that I have been profiling in my analysis of the biggest FDIC-insured financial institutions. However, investors and Wall Street continue to ignore the stress that I found in the banking system in the FDIC Quarterly Banking Profile for the third quarter of 2012.
If you are investing or trading bank stocks you should read my post from Dec. 5
Back on Nov. 1, I wrote
Looking at ratings from www.ValuEngine.comtoday versus Nov. 1, only one stock was downgraded.On Nov. 1 only two of our nine benchmark bank stocks were below their 200-day simple moving averages. Today we find five of nine below their 200-day SMA. Eight of the nine bank stocks have gains of 20.6% to 81.3% over then last 12 months. None are projected to come close to these performance measures over the next 12 months. All nine banks stocks are cheap based upon 12 month trailing price-to-earnings ratios between 7.7 and 15.3. All nine stocks are in the make-up of the 24 bank stocks in the PHLX KBW Banking Index (BKX). Chart Courtesy of Thomson/Reuters The daily chart for the BKX ($48.64) shows that the index representing the nation's biggest banks is trading between its 200-day and 50-day simple moving averages at $47.25 and $49.42. The BKX is well below its post-recession high of $58.81, set during the week of April 23, 2010. A close this week below the five-week modified moving average at 48.82 keeps the weekly chart profile negative indicating risk to the 200-week SMA at $44.99. A weekly close below my quarterly pivot at $47.55 indicates risk to this month's value level at $45.18.