JPMorgan, Wells Fargo Among Regional Banks That Are Vulnerable

NEW YORK (TheStreet) - At the beginning of July all 24 components of the KBW Banking Index had positive weekly chart profiles. Five had overbought 12x3xx3 weekly slow stochastic readings and 19 had rising stochastics. These readings can be found in my first "crunching the numbers" published on July 7.

BB&T Bank (BBT) was the only bank to miss earnings per share estimates. This bank reported on July 21 and missed by 5 cents. This stock was up 7.1% year to date on July 3 and is down 7.4% since then.

Regions Financial (RF) and Wells Fargo (WFC) were the only banks to match analysts EPS estimates. Regions Financial was up 9.9% year to date and is down 6.7% since then. Wells Fargo was the biggest year to date gainer on July 3, up 17% and is down 4% since then.

The largest earnings beat was posted by Capital One (COF) by 27 cents. Capital One had a year to date gain of 11% on July 3 and is down 6.4% since then.

Better-that-expected earnings from regional banks was anticipated as 18 of 24 set their July highs by July 16.

In today's first "crunching the numbers" table 15 show declining 12x3x3 weekly slow stochastics, five are overbought and four have rising stochastics.

On July 3 I showed that all 24 banks were above their five-week modified moving averages. Today 15 are below their five-week modified moving averages.

Only five banks are higher than their July 3 closes. The best gainers are Northern Trust (NTRS) up 3.1% and Bank of New York (BK) up 2.9%.

The biggest losers since July 3 are PNC Financial (PNC) down 8.2% and BB&T down 7.4%.

In my July 7 post, "Wells Fargo, PNC Financial Lead 24 Banks in the KBW Banking Index" I warned that earnings from regional banks may disappoint based upon data from the FDIC.

On June 4 I wrote, "Bank Stocks Have Staged a Nice Rebound, but Don't Expect It to Last". In this post I mentioned that the FDIC Quarterly Banking Profile for the first quarter showed a decline in earnings do to reduced noninterest income such as a slower decline in reserves for losses and lower asset sales.

Here are updated profiles for the four "too big to fail" money center banks. Two "crunching the numbers" tables follow.

Bank of America (BAC) ($15.25) traded as high as $16.23 on July 3 anticipating a solid earnings report on July 16. The stock was above its 200-day simple moving average at $15.78 on July 15 but has been below since beating analysts EPS estimates by 2 cents.

The weekly chart is neutral with its five-week modified moving average at $15.46 and the 200-week SMA at $11.58. Semiannual value levels lag at $10.16 and $9.11 with monthly and quarterly risky levels at $15.92 and $19.37, respectively.

Citigroup (C) ($48.91) gapped higher on July 14 on a better than expected earnings report moving above its 200-day SMA at $49.30 on July 15 to a high at $50.59 on July 23. Now the stock is back below its 200-day.

The weekly chart stays positive given a close today above its five-week MMA at $48.47 and its 200-week SMA at $41.01. Semiannual and monthly value levels are $47.07 and $44.51, respectively, with a semiannual pivot at $48.92 and weekly risky level at $49.67.

JPMorgan Chase (JPM) ($57.67) gapped higher on July 15 on a better than expected earnings report trading as high as $59.35 on July 24 and is above its 200-day SMA at $56.61.

The weekly chart stays positive given a close today above its five-week MMA at $57.35. Annual and semiannual value levels are $50.39 and $47.41, respectively, with semiannual and monthly pivots at $57.39 and $57.81, respectively, and weekly and monthly risky levels at $59.77 and $63.20, respectively. The monthly pivot is not shown in today's first table.

Wells Fargo ($50.90) set an all-time intraday high at $53.08 July 3 before reporting their earnings match on July 11. The stock ended July below its 50-day SMA at $51.65 with its 200-day SMA at $47.49.

The weekly chart becomes negative given a close today below its five-week MMA at $51.40. Semiannual and annual value levels are $43.27 and $37.63, respectively, with a semiannual pivot at $60.95 and quarterly and monthly risky levels at $53.09 and $54.24, respectively.

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 are listed in red.

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.

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.

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

This table presents the EPS estimates including date and before or after the close, and where to buy on weakness and where to sell on strength.

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

EPS Beat or Miss is the earnings per share miss or beat.

Reported EPS is what each company actually reported

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.

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, although positions may change at any time.

Follow @Suttmeier

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

More from Opinion

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

Wednesday Wrap-Up: GE and Facebook

Wednesday Wrap-Up: GE and Facebook

PayPal Strikes Again, Facebook, and AT&T -- 3 Tech Stories You Must Know

PayPal Strikes Again, Facebook, and AT&T -- 3 Tech Stories You Must Know

How to Invest Like Warren Buffett

How to Invest Like Warren Buffett

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites