The four major U.S. banks are at critical inflection points, and if already invested these stocks warrant attention. If not in a position, there may be opportunities depending on which way the price reacts at these levels. Over the last several months the financial sector as a whole has been "middle of the road" — it isn't the worst sector but is far from the best. That in itself indicates these stocks aren't the ideal place to be investing. This view aligns with the typical sector rotation model which sees financials generally doing quite well in early bull markets (or in late bear markets), but not performing as well during the later stages of a bull market like we're seeing right now in U.S. equities. (For more, see: Sector Rotation: The Essentials.)

While the S&P 500 moved to the a new high on Aug. 20, Wells Fargo & Co. (WFC) is well off its July 3 high at $53.08. In August, its price bounced off strong support at $49.50, a level which could be tested again soon. Since the July high the price has been trending lower, and reached downward sloping trendline resistance on Aug. 22 at $51.60. In the short-term, watch for a drop below $50.75 to signal a retest of $49.50. While the short-term outlook isn't favorable, the long-term trend remains up. It isn't the strongest stock but if the price holds above $49.50, and then breaks back above $51.60, it indicates this uptrend probably isn't over yet and there is room to run toward the top of the trend channel at $55 to $56. (For related reading, see: Follow These Four Large-Cap, Market-Beating Stocks.)

WFC long term trend up

JPMorgan Chase & Co. (JPM) continues to move in an upward sloping trend channel. Having recently tested the lower portion of the channel, which held, if the price proceeds above $59.35 the price will likely continue to push toward the top of the channel between $63.50 and $64. On the other hand, a drop back below $55.50 is bearish for the stock. Overall the stock remains well off its March high, and while it may be recovering currently, the relative weakness over the last six months compared to the broader market can't be ignored. (For more, see: The Utility of Trendlines.)

JPM upward sloping trend

Bank of America Corp. (BAC) rallied several percentage points on Aug. 21, but overall the stock is underperforming the S&P 500 by about 4.5% year-to-date. $16.23 is a short-term resistance zone, and while the price popped above it briefly on Aug. 22, ultimately the stock ended up closing the day below it. If the price can break through resistance it keeps alive long-term uptrend hopes. If the price can't break and hold above $16.23, watch for a test of minor support at $14.84. If the price falls below that, another leg lower will already be underway, taking the stock down to projected support near $12.80. (For more, see: Interpreting Support And Resistance Zones.)

BAC rallied several percentage points on August 21

Citigroup Inc. (C) has been moving within about a $10 price range since May of 2013. Most of the price peaks have occurred near $53, making it the logical upside target. In early 2014 the price managed to reach $55.28, making is a more ambitious price target, although less probable. Through 2014 the stock has found support between $45.18 and approximately $46.50. If looking to buy, that support region is the place to do it, as it offers the greatest profit potential assuming the range continues. Given the inability for the stock to trend higher, even while the S&P 500 continually reaches new highs, indicates an upside range breakout is a low probability. For those who are bearish on the sector shorting the stock in the $53 to $55 range is a viable trade. (For more, see: These Stocks, REITs Are At Support Buy Zones.)

C has been moving within range

The Bottom Line

Recent buying in major U.S. bank stocks may make them look attractive, but the broader picture doesn't prove as rosy. These stocks are off their 52-week highs and showing relative weakness compared to the broader market. Financials typically do well in early bull markets, and not as well in a mature bull market like now. Therefore, while these stocks could continue to trend higher, it's not the most efficient use of capital, and in some cases even going short on rallies may be the better trade than buying. When trading individual stocks anything can happen, so no matter what stock or position is being traded, only risk a small percentage of your account on each trade. (For related reading, see: Is It Time To Short Financials?)

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