NEW YORK ( TheStreet) -- I have been warning about the risk of reversion to the mean and in my first post today I showed how 11 components of the Dow Industrial Average have either held their 200-day simple moving averages on weakness, or are now trading below its 200-day SMA.
In this post I show that only one of the 24 members of the regional banking index is below its 200-day SMA. Others have been declining towards these key levels as key supports after failing to hold their 50-day SMAs.
All 24 regional banks are overvalued with seven overvalued by more than 20%. All have hold ratings according to www.ValuEngine.com . Only one is slightly lower over the last 12 months while 11 are up between 21.1% and 56.1%. Only one is below its 200-day SMA. 22 of 24 are below their 50-day SMAs which indicate risk to the 200-day SMAs reflecting the continued risk of reversion to the mean.
Reading the TableOV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine. VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy. Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage. Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months. Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual. Pivot: A level between a value level and risky level that should be a magnet during the time frame noted. Risky Level: Price at which to enter a GTC limit order to sell on strength.
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