Big Bank Technical Outlook

By Cory Mitchell | September 02, 2014 AAA

The financial sector continues to perform well, with the Financial Select Sector SPDR (ARCA:XLF) moving roughly inline with the S&P 500 so far in 2014. The sector ETF and major market index remain in a uptrend. The major US banks compose more than 25% of the Financial ETF portfolio, so whether trading the ETF, or the stocks individually, here's their technical outlook.

Year-to-date (YTD) Bank of America (NYSE:BAC) is the top performer of these major US banks, up more than 10%. The price recently climbed above former resistance at $17.50 but quickly retreated back below. The trend remains up, although until this resistance area--$17.50 to $17.70--is cleared the price could consolidate. Buying opportunities are present down to $16.05, but a drop below $16 creates a lower low and indicates a larger reversal is potentially underway. The upside target range is between $18.30 and $18.60. A trend channel on the weekly chart also indicates an entry above $16 and target near $18.50. As long as the channel holds, longer-term traders can move targets and stop losses higher as the channel rises.

Year-to-date (YTD) Bank of America (NYSE:BAC) is the top performer of these major US banks, up more than 10%.

Wells Fargo (NYSE:WFC) is the second best performer YTD, up more than 6%. When the S&P 500 pulled back last week, Wells Fargo barely budged, and then moved right back to near the 52-high on March 18. This is a sign of short-term relative strength. A break above $48.50 provides a short-term target of $49.30 and a slightly longer-term target at $50.50. The buying area is between $48.50 and $47.30, with a stop below $47.25. On a cautionary note, the stock is right at the top of a channel, although that doesn't necessarily indicate it can't go higher from here. Longer-term traders can look for entry points near $46, with targets near the top of the channel and a stop loss below the channel.

Wells Fargo (NYSE:WFC) is the second best performer YTD, up more than 6%. When the S&P 500 pulled back last week, Wells Fargo barely budged, and then moved right back to near the 52-high on March 18.

JPMorgan Chase (NYSE:JPM) is just about flat YTD, which ranks third among these four banks. The stock is currently trendless, unable to climb above the 52-week high of $59.82. A series of rising lows in the short-term indicates potential buying pressure, but until the price creates a new high, Bank of America and Wells Fargo provide better trading opportunities. A break above $59.82 signals an advance, but the choppy nature of the stock over the last year indicates it could quickly fail. A drop below the short-term trend line at $56.75 is likely to push the stock toward primary support just above $54.

JPMorgan Chase (NYSE:JPM) is just about flat YTD, which ranks third among these four banks.

Citigroup (NYSE:C) is down more than 7% YTD, making it the weakest of these four major US banks. The stock is range bound on multiple time frames, with the short-term trend down. A support area is between $47 and $46. If the price drops below, there is additional support at $45. A drop below $45 signals an end to the range and a potential price decline to $38 to $35. A rally back above $50.50 signals short-term strength and a potential re-test of the resistance area between $53 and $55.26. With no clear direction, and support and resistance all over the place hampering clear movement, avoid this one if possible until a more clear trend develops.

Citigroup (NYSE:C) is down more than 7% YTD, making it the weakest of these four major US banks.

The Bottom Line

The financial sector is keeping pace with the S&P 500 and remains in an uptrend. The major US banks are mixed though. Bank of America and Wells Fargo are showing clear trends, while JPMorgan and Citigroup aren't. While anything can happen in the future, the more tradable stocks are currently BAC and WFC. No matter what stock or ETF you trade, control risk and keep the position size in line with account size so a loss doesn't significantly impact the account balance.

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