By Kevin Grewal, editorial director at SmartStops.net.

Now that the second quarter has almost come to an end and four of the nation's largest banks have released their earnings reports, which have all outperformed Wall Street's expectations. Does this mean that the financial sector has emerged from its woes and is on the verge of prosperity?

Advocates suggest that the sector has already hit rock bottom and really can't do anything but go up. Signs of strength have also been seen in the ability of some banks to pay back TARP loans and raise capital. In addition, some investors are saying that banks are relatively cheap and could possibly be a good buy.

On the other hand, the basic fundamentals of the sector are weak and from a technical perspective the sector does not seem too healthy. As companies continue to implement cost-cutting measures, unemployment numbers continue to rise and consumer confidence remains shaky, the sector will remain weak. Also, most of the prominent banks believe that consumer credit is still in trouble, which will hinder the overall performance of the industry.

There are plenty of indicators that the recession is easing up, including better than expected GDP numbers. Things are finally starting to ease and the financial sector will benefit from encouraging macroeconomic news.

If one does consider playing the financials, keep in mind the risks involved with them. To mitigate these risks, an exit strategy utilizing stop losses is key. Take a look at SmartStops.net, which will give you a trigger indicating that an upward trend in your financial equity might be coming to an end. Keep in mind that these triggers change as the markets fluctuate and updated data is available at SmartStops.net.

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