Monday, February 23, 2009

Financials: WFC vs. BBT

Anybody going long into financials must have gonads the size of Cleveland, but the case could be made that Friday was a wash-out day of sorts and the sector is oversold.  Keeping with the "irons in the fire" theme, maybe nibbling at a bank or two is in order.

XLF is an unmitigated disaster with unrelenting selling.  The anti-Democrats will say that it's because of the lack of a Geithner plan, or the liberal use of the 'N' word (nationalization), or the populist angst verbalized by the Derivitive Trader to the Stars, Rick Santelli.  Or, more sane people would postulate, it may be because these companies have NO EARNINGS and have LOADS OF WORTHLESS ASSETS, but I digress...  

XLF is oversold on a technical basis.  Spike lower on high volume. Full stop.  So if we want to take advantage of a counter-trend rally, how do we do it?

WFC shows a similar pattern on the daily chart.  Spike lower, high volume, wash-out/ capitulation pattern.  But this is a toxic bank with lots of bad stuff going on.  Can it be trusted on the long side??

BBT by some accounts has better fundamentals with less bad debt and more solid assets.  It may be the best house in a bad neighborhood... which could mean it's a safe place to live, or it could mean that the natives will torch it next.  The "outside"reversal pattern is statistically more bullish, but ONLY if it confirms with an up-move the day after.  Big decision.

WFC on the hourly shows some good upside volume at the end of Friday... and I even jumped onfor an hour and a buck.  But this still has a lot of bearish resistance to break through.  Eric likes this stock, but I don't trust it.

BBT on the hourly chart looks healthier.  It has already broken through it's bearish trendline and is poking it's nose at the horizontal resistance.  If it breaks through, we could ride it for a few bucks.  Sell stop 

would be Friday's intraday low of $13.20... if you're brave.  Strong futures and I may get in pre-market.

It takes some major league intestinal fortitude to think about going long banks, but maybe this falling knife can be caught.

No comments:

Post a Comment