Analyzing three banking stocks

Some of us in USA Traders’ Community have been tracking several financial stocks. Let me take this opportunity to compare several of them.

Let us start with XLF – the financials ETF. And compare it with SPY.

Both SPY and XLF are in up trend as seen from Direction Lines and the Candles’ forming Higher High and Higher Low. However, they are not in strong up trend in recent period.

Since the Gap Up of 21st Nov 2014, XLF is moving sideways – more or less mirroring the movement of SPY. One difference stands out on the Gap Up day itself. SPY had gapped up with High Activity. Whereas XLF gapped up with Low Activity.

Sine 21st Nov Gap UP day, both XLF and SPY are moving with Low Activity. Showing that stock players are not that enthusiastic to buy them up (or to sell them down !) for the time being.

Looking at Candle bars, we see that SPY Traffic Light Candle color has turned neutral yellow. XLF is still green. Thus, XLF is stronger than SPY in terms price performance – this is reflected in XLF’s Relative Performance tilting up.

Overall, we may conclude that both XLF and SPY are in overall uptrend but that uptrend is not very strong.

If one is expecting weakening of financial sector, then one may get ready with some financial stock(s) to trade from bearish side. Let us explore this possibility.

We will compare three banking stocks. BAC (Bank of America), C (Cit bank) and GS (Goldman Sachs).

From the chart reading of Superior Profit Signals one may infer that GS and BAC are more bearish than C.

For both GS and BAC the edge (as per the chart signals) seems to be in favor of Short trade than Long trade.

Which one would one choose if one wanted to Short only one? Both are in early stage downtrend. Both has Low Risk and Higher Reward potential in terms of Shorting the stocks.

We may call it a tie between BAC and GS in terms of chart signals.

And if it is a tie, and we have to choose one then which one does one choose? For Stock trading, the trader may use her understanding of the two companies and choose one that is a weaker stock in her view.

For Options One may look at the Options chain and choose a spread and see how the Options’ Reward Risk stack up.

Here is one potential Long Put Vertical on BAC with attractive Reward Risk Ratio. You may analyze other possibilities on BAC and/or GS.

Based on the above analysis and/or your own study of these stocks, what would you do? Long Short or stand aside on these stocks?

Close Menu