Can Financials be trusted?

Answer: No.  We had a nice bounce today in an oversold market.  Big whoop.  But trades can be made to net some coin.

XLF broke above resistance, but it's not convincing enough act as horizontal support.  The trendlines look ominous.

BBT is the best house in the 'hood.  Nice 14% run today up to resistance and then stopped.  I did take advantage of this from 15.15 to 16.79, but don't trust it enough further at this time.  This may run, tho.  After hours, it announced a dividend increase and is up another 3%.  Sweet.

WFC: no question this had the best bounce from extremely oversold conditions (as Eric will remind me again and again I'm sure; after all, his right brain is more developed, but Friday's VOLUME was the key in retrospect.)  The 17% run is impressive, but can the 12.45 act as support?

Longer term, however, if I had to own one bank, BBT would be it.  Six months from now, BBT does better than WFC: that I will guarantee.*

TROW is the dog of the financials.  I took some short at the close and it has not disappointed, giving up 8% so far after hours.  If the financials tank tomorrow, this one will lead the way down.

*with a CDS backed by Citigroup.

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.