How to Trade 5 Regional Banks With Overbought Technical Charts

Third-quarter earnings for super regional banks BB&T (BBT) , M&T Bank (MTB) , PNC Financial (PNC) , SunTrust (STI) and U.S. Bancorp (USB) were positive enough for these stocks to trade higher in October. Next up: the question of whether the Federal Reserve will raise interest rates by the end of the year. The Fed's Open Market Committee meets Tuesday and Wednesday, and again from Dec. 13 to 14. Bank stocks are firm on the belief that higher interest rates will help improve net interest rate margins -- and bank profits.

This notion will be put to the test following the next dose of data from the Federal Deposit Insurance Corporation. The Quarterly Banking Profile for the third quarter is due for release around the end of November or beginning of December.

The FDIC will likely remain concerned about the prolonged period of low interest rates continuing to pressure net interest margins. Investors should be aware of mark-to-market losses on "bonds held for trading," and the fact that some banks have reached for yield with maturity mismatches, opening exposure to higher yields and wider quality spreads.

Here's a scorecard for the five regional banks.

BB&T is in bull market territory, up 30.9% since its Feb. 11 low of $29.95. It has a positive but nearly overbought weekly chart. BB&T reported earnings on Oct. 19 that beat analysts' estimates.

M&T Bank is in bull market territory, up 22.6% since its Feb. 11 low of $100.08, and has a positive weekly chart. M&T reported earnings on Oct. 19 and beat analysts' estimates.

PNC Financial is in bull market territory, up 23.5% since its June 27 low $77.40. It has a positive but overbought weekly chart. PNC reported earnings on Oct. 14 and beat analysts' estimate.

SunTrust is in bull market territory, up 45.6% since its Feb. 11 low of $31.07, and has a neutral weekly chart as momentum is declining. SunTrust reported earnings on Oct. 21 and beat analysts' estimates.

U.S. Bancorp is in bull market territory, up 30.7% since its Feb. 11 low of $37.07. It has a positive and nearly overbought weekly chart. U.S. Bancorp reported earnings on Oct. 19 and matched analysts' estimates.

Here's the daily for BB&T.

Courtesy of MetaStock Xenith

The horizontal lines on the daily chart for BB&T are the Fibonacci retracements from the July 23, 2015, high of $41.90 to the Feb. 11 low of $29.95.

The stock has been above a "golden cross" since July 18, when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices were ahead. The stock moved above its 50% retracement of $35.93 just before this bullish signal. The stock set its 2016 high of $39.62 on Oct. 27, well above its 61.8% retracement of $37.33.

Investors looking to buy the stock should consider doing so on weakness to $37.44 and $32.71, which are key levels on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $39.24 and $40.00, which are key level on technical charts until the end of 2016. The high was between these levels.

Here's the daily chart for M&T Bank.

Courtesy of MetaStock Xenith

The horizontal lines on the daily chart for M&T Bank show the Fibonacci retracements from the July 23, 2015, high of $134.00 to the Feb. 11 low of $100.08.

The stock has been above a "golden cross" since June 13, when the 50-day simple moving average trended above its 200-day simple moving average, indicating that higher prices were ahead. This bullish signal was put to a test as the stock dipped to as low as its 23.6% retracement of $108.08 on June 27. The stock is now above its 61.8% retracement of $121.04.

Investors looking to buy the stock should do so on weakness to $117.18 and $111.89, which are key levels on technical charts until the end of 2016. Investors looking to reduce holdings could have done so as the stock filled the gap to its Dec. 31 low of $121.18. $138.58 is a key level until the end of 2016.

Here's the daily chart for PNC Financial.

Courtesy of MetaStock Xenith

The horizontal lines on the daily chart for PNC show the Fibonacci retracements from the July 23, 2015, high of 100.52 to the June 27 low of $77.40.

The stock has been above a "golden cross" since Sept. 23, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices were ahead. The stock was trading around its 50% retracement of $88.95 as this bullish signal was confirmed. The 2016 high of $95.74 was set on Oct. 28.

Investors looking to buy the stock should consider doing so on weakness to $76.11, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $105.50, which is a key level on technical charts until the end of 2016. Investors could have reduced holdings when the stock filled the price gap to the Dec. 31 low of $95.20.

Here's the daily chart for SunTrust.

Courtesy of MetaStock Xenith

The horizontal lines on the daily chart for SunTrust show the Fibonacci retracements of the rally from the Feb. 11 low of $31.07 to the 2016 high of $46.88, set on Oct. 20.

The stock has been above a "golden cross" since May 27, when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices were ahead. Weakness was to the 50% retracement of $38.97 following this bullish signal, and the 2016 high of $46.88 was set on Oct. 20.

Investors looking to buy the stock should consider doing so on weakness to $40.57, which is the 200-week simple moving average. A key level of $44.60 is in play until the end of 2016. Investors looking to reduce holdings should consider selling strength to $47.74, which is a key level on technical charts until the end of 2016.

Here's the daily chart for U.S. Bancorp.

Courtesy of MetaStock Xenith

The horizontal lines on the daily chart for U.S. Bancorp show the Fibonacci retracements from the July 16, 2015, high of $46.26 to the Feb. 11 low $37.07.

The stock has been above a "golden cross" since Aug. 23, when its 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices were ahead. After this bullish signal, the 61.8% retracement became a magnet at $42.76, and the 2016 high of $45.14 was set on Oct. 27.

Investors looking to buy the stock should consider doing so on weakness to $43.15 and $35.85, which are key levels on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $47.09, which is a key level on technical charts until the end of 2016.

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

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