How to Trade the Four ‘Too-Big-To-Fail’ Banks After FDIC Report

NEW YORK (TheStreet) -- The four "too-big-to-fail" money-center banks continue to maintain a significant percentage of total assets in the banking system as the numbers of Federal Deposit Insurance Corp.-insured financial institutions shrink. The number of FDIC-backed banks declined by 303 in 2014 to 6,509, and the top four control 43% of all assets.

Here's how to trade shares of those banks -- Bank of America (BAC) - Get Report, Citigroup (C) - Get Report, JPMorgan Chase (JPM) - Get Report and Wells Fargo (WFC) - Get Report -- in light of fresh data from the FDIC Quarterly Banking Profile for the fourth quarter. The analysis and charts provided will help investors navigate any share-price volatility that may occur following the release of the Federal Reserve Stress Tests later this week.

Jim Cramer's charitable trust Action Alerts PLUS is long Wells Fargo and added to the position last month. Read the reasons why here.

Here's a year-over-year Asset Scorecard for the four banking giants.

In 2014, Wells Fargo added $136.9 billion in total assets and now controls 10% of all the assets in the banking system. JPMorgan picked up $135.4 billion in assets and now controls 14.2%. These two should not have any stress tests issues and are trading just below all-time intraday highs of $55.94 and $63.49, respectively.

Bank of America reduced its total assets by $18.9 billion in 2014, but still controls 10.3% of all assets in the banking system. Citigroup limited its asset growth to just $10.1 billion in 2014 and reduced its control of assets in the banking system to 8.7%. Shares of Bank or America and Citigroup are lagging their all-time highs by significant percentages.

Total assets among the four big banks increased by $263.5 billion, or 4.1%, to $6.73 trillion in 2014, which is 43.3% of total assets. Total assets among all banks rose by $830.9 billion, or 5.6%, to $15.55 trillion.

Here's the weekly chart for the KBW Banking Index followed by the performance measures and trading guidelines for the big banks.

Courtesy of MetaStock Xenith

The weekly chart for the banking index shows the Fibonacci retracement levels from the 85% crash from the high set in February 2007 high to the low set in March 2009. The index has been trading around its 50% retracement since the end of 2013. Below is the 38.2% retracement at $57.21, which lines up with the 200-week simple moving average (green line) at $57.06. The next upside is to the 61.8% retracement at $81.54.

Bank of America ($16.01) is down 11% so far in 2015, and is up 12% from its Jan. 16 low of $14.97.

Investors looking to buy Bank of America should enter a good 'til canceled limit order to buy on weakness at a semiannual technical level of $12.41.

Investors looking to reduce holdings should enter good 'til canceled limit orders to sell on strength at monthly and quarterly technical levels of $17.35 and $19.46, respectively.

Citigroup ($53.49) is down just 1.1% so far in 2015, and is up 15% from its Jan. 16 low of $46.60.

Investors looking to buy Citigroup should enter a good 'til canceled limit order to buy on weakness at a semiannual technical level of $39.44.

Investors looking to reduce holdings should enter good 'til canceled limit orders to sell on strength at monthly and quarterly technical levels of $56.41 and $59.90, respectively.

JPMorgan ($61.77) is down just 1.3% so far in 2015, and is up 14% from its Feb. 2 low of $54.27.

Investors looking to buy JPMorgan should enter a good 'til canceled limit order to buy on weakness at a semiannual technical level of $57.12.

Investors looking to book profits should enter a good 'til canceled limit order to sell on strength at a quarterly technical level of $70.29.

Wells Fargo ($55.55) has gained just 1.3% so far in 2015, and is 10% above its Jan. 14 low of $50.42.

Investors looking to buy Wells Fargo should enter a good 'til canceled limit order to buy on weakness at a semiannual technical level of $51.70.

Investors looking to book profits should enter a good 'til canceled limit order to sell on strength at a quarterly technical level of $61.11.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.