Filed Under:
Tickers in this Article: MS, GS, C, AIG, XLF
So far this year, the financial sector has been hit hard by selling. The SPDR Financial ETF (NYSE:XLF) is down 19.2% so far this year, to $13.17, from $16.30. Some big names have seen extensive selling, and at some point these stocks become a value. Four big name stocks are showing indications of a turning tide, and a buying opportunity may be presenting itself in a handful of big-name financial companies.

Morgan Stanley (NYSE:MS) has been one of the hardest hit major financial players; in the last six months the stock is down 26.42% to $16.57, from $22.52. In November, the stock could not reach the low it hit in October, indicating buying support. Prior to this, in late October the stock had surged above September highs. The combination of these price moves indicates an uptrend could be underway. The ultimate test will be $20 (October resistance) - if the price can push through, it would confirm the uptrend. On-balance volume is rising aggressively, and this signals that buyers are willing to step in at these levels. If the stock drops back below $13, it is a sign of weakness. (For more, see Support & Resistance Basics.)

Citigroup (NYSE:C) has also had a rough past six months, down $21.64% to $29.83, from $38.07. This stocks also created a higher high in October, followed by a higher low in November. This provides evidence that an uptrend is underway. On-balance volume is rising, and it is also in an uptrend, showing there is buying interest in the stock. $34.40 was the October high and the level to watch on the upside. If Citigroup can push through that level, the uptrend is confirmed. On the other hand, a drop below $24 is a negative signal.

Goldman Sachs (NYSE:GS) is one of the most recognizable names in finance, yet it is down 25.45% in the last six months to $99.82, from $133.90. Similar to Morgan Stanley and Citigroup, Goldman also made a higher high in October and a higher low in November. The higher low in November was not as pronounced, though - a sign the stock still had some aggressive selling taking place. On-balance volume is rising though, and this confirms the recent moves higher.

There are obstacles for the stock. Mainly it has failed to significantly push past the 50-day moving average, and GS must also still push through the psychological $100 level. If it can do this, it still has a long way to go to reach the October high at $118.07. If that level is surpassed, though, the uptrend is confirmed. A drop below $88 would point to continued downward pressure.

American International Group (NYSE:AIG) has lost more than half its value so far this year, and is down 13.44% in the last six months to $23.57, from $27.23. The stock has a very similar outlook to GS. It is facing some headwinds, but also showing some positive signs. The stock made a higher high in October and a higher low in November - although not by much - which are signs an uptrend is emerging. On-balance volume is rising and the stock has cleared its 50-day moving average. A drop below $20 indicates this stock is still under significant selling pressure.

The Bottom Line
Four big names in the financial sector are at a potential turning point. All have seen a higher high in October and a higher low in November, which are signs of a potentially emerging uptrend. Rising on-balance volume indicates there is buying interest in these stocks at these levels, yet until the stocks clear resistance overhead, the uptrend is not confirmed. Support levels should be monitored closely, as this sector still poses risks. If support is broken to the downside, the uptrend is taken off the table, at least for the short term.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

comments powered by Disqus
Trading Center