Crunching the Numbers on Bank Earnings Season: JP Morgan, Wells Fargo, Citi

NEW YORK (TheStreet) -- Regional and money center banks have traded lower since the Federal Reserve reported the results of the first round of stress tests on March 21. Today I update the tables we showed in "Mega-Chart! Regional Bank Earnings Season" on April 3.

Kicking off bank earnings season are JPMorgan Chase (JPM) and Wells Fargo (WFC), which report before the opening bell on Friday.

Today's "Crunching the Numbers" tables provide updated moving averages, key levels and earnings expectations for the 24 bank stocks in the KBW Banking Index (I:BKX). See page 2 of this article for the charts.

The first table provides the five major moving averages and stochastic readings. Note that 20 of 24 of these banks are lower since March 21, led by "too big to fail" Bank of America (BAC) and Citigroup (C), which are down 5.4% and 5.8% respectively since those first stress test results. Capital One (COF) has the biggest gain but is only up 1.2%.

Note that 18 of 24 are now below their 21-day simple moving averages, which are warnings from the daily charts. Eight are below their five-week modified moving averages, which are warnings on the weekly charts.

The second table provides earnings estimates and dates, value levels at which to buy on weakness and risky levels at which to sell on strength. Since our April 3 post, analysts lowered their earnings per share estimates on seven of the 24 bank stocks, including Bank of America, Citigroup, JP Morgan and Wells Fargo, our focus names in today's report. None of the 24 had upward revisions to earnings.

This week the U.S. banking regulators decided to raise the capital leverage ratio to 5% to 6% of total assets. This will require the eight largest banks to hold another $68 billion in capital beginning in January 2018. This is in addition to a still-unknown amount that will be required to fund the Deposit Insurance Fund by September 2020.

Keep in mind that recent quarterly earnings have been buoyed by reduced reserves for losses and asset writedowns. Mortgage activities have been slashed and profitability in securities held for trading may be underwater. New mortgage issuance is at a 14-year low and first time buyers have a difficult time qualifying for loans.

One of the biggest surprises to me is that Commerce Bancshares (CBSH), Cullen Frost (CFR), US Bancorp (USB) and Wells Fargo have traded to new all-time highs when the banking index is just above its 50% Fibonacci retracement and well below its 61.8% retracement.


Bank of America ($16.62, down 5.4% since March 21) traded as high as $18.03 on March 21, then traded as low as $16.19 on April 7. It is below its 21-day and 50-day simple moving averages at $17.11 and $16.86.

The weekly chart shifts to negative with a close on Friday below its five-week modified moving average at $16.79. A semiannual value level lags at $10.69 with a quarterly pivot at $16.53 and monthly and weekly risky levels at $16.72 and $16.88.

Citigroup ($47.16, down 5.8% since March 21) has been below its 200-day SMA at $50.17 since March 26. It traded to a 2014 intraday low at $46.12 on April 8.

The weekly chart is negative, with its five-week MMA at $48.26, and with a monthly value level at $46.06. An annual value level is $21.86, with a weekly pivot at $47.21 and semiannual and quarterly risky levels at $48.06 and $49.61.

JP Morgan ($59.27, down 1.5% since March 21) set a multiyear intraday high at $61.48 on March 25, then traded as low as $58.25 on April 8 and is just below its 21-day SMA at $59.41.

The weekly chart is positive, with its five-week MMA at $58.75. Monthly and quarterly value levels are $56.06 and $54.47 with a weekly risky level at $60.85.

Wells Fargo ($49.49.10, flat since March 21) set an all-time intraday high at $50.49 on April 4, then dipped to $48.44 on April 8. The stock is above all five key moving averages shown in today's tables.

The weekly chart is positive but overbought, with its five-week MMA at $48.07. Quarterly and monthly value levels are $47.33 and $46.67, with a weekly risky level at $50.41.


Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics

This table provides the technical status for the stocks profiled in today's report.

There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.

The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.

Interpretations: (Stocks below a moving average listed in red are below that moving average.)

Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.

A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.

A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.

A stock with a neutral technical rating has a profile that is not positive or negative.

The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three to five year horizon. (Even Apple declined to its 200-week SMA in June 2013.)

The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.

The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.

The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six to 12 month horizon. (Even Apple tested or crossed its 200-day SMA in nine of the last 10 years.)


Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Where to Sell

This table presents earnings estimates, the date of earnings and where to buy on weakness and where to sell on strength.

EPS Date is the day the company reports their quarterly results.

EPS Estimate is the earnings per share estimate from Wall Street analysts.

Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.

Note: Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

Richard Suttmeier is the chief market strategist at ValuEngine.com. He can be reached at RSuttmeier@Gmail.com.

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