The BKX includes the four banks considered "too big to fail." If you are already long any of these stocks you should consider shifting from a "buy and hold" investment strategy to a "buy and trade" strategy to take advantage of the ups and downs in the price of a stock; use GTC Limit Orders to buy weakness to a value level, and to sell strength to a risky level.
The daily chart for BKX ($52.89) is overbought with the 21-day, 50-day and 200-day simple moving averages at $51.34, $49.78 and $47.77. The BKX traded to a 52-week high at $53.76 on Jan. 4 vs. this week's risky level at $53.69.
My monthly and semiannual value levels lag at $47.92 and $47.58, which is the downside risk on a disappointing earnings season. The upside potential is to the April 2010 high at $58.81.
Chart Courtesy of Thomson/Reuters
The finance sector is 12.8% overvalued and there are four of 16 sectors more overvalued. Between Friday and Jan. 28, the 17 banks I am profiling report their fourth-quarter earnings results, with 13 of them like a wave between Jan. 15 and Jan. 18. Today's table shows the date each bank reports and the current EPS estimate.At www.ValuEngine.com we show two of the 17 stocks rated strong buy and 15 stocks rated buy. We show six bank stocks overvalued by 0.4% to 14.6% overvalued. The other 11 are undervalued by 1.9% to 30.9% undervalued. All 17 stocks had double-digit returns over the past 12 months with gains of 14.0% to 83.2%. The forecast one-year returns are not that robust, between 5.5% and 12.9%. Five of the banks have single-digit price-to-earnings ratios and 12 have reasonable P/E between 10.0 and 19.1. Only one of the 17 bank stocks is trading below its 200-day simple moving averages so reversion to the mean is an issue in 2013.