(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Bank stocks have been performing exceptionally well recently, as tax reform appears to be getting pushed through Congress. Since November 27, shares of the Financial Select Sector SPDR (XLF) are trading up by nearly 7.5 percent, while the S&P 500 has risen by roughly 3 percent. Shares of Bank of America Corp. (BAC) and Goldman Sachs Group Inc. (GS) are up almost 11 percent, while Morgan Stanley (MS) has climbed by nearly 10 percent, an impressive run in just a short period.
The run is likely not over because from a technical standpoint, these three banks have all broken out, and that means more gains are likely on the horizon. In an Investopedia article on November 20, we noted that some of the banks were on shaky ground approaching critical support levels. The banks as a group have not only held those levels but were able to rally higher. (See also: JP Morgan and Citigroup Are Facing More Declines.)
The rise is likely not finished, either, as positive momentum is behind the banks, with the financial ETF approaching all-time highs. But the first potential for resistance comes about 5 percent higher, around $29.20. Should shares of the ETF break out, it could see a rise on toward $31, nearly 11 percent higher.
Goldman Sachs Hits All-Time Highs
Shares of Goldman Sachs broke out to new all-time highs after crossing over $250. With shares now trading around $260, the stock could see a significant advance from current levels. The stock has risen from roughly $220, a climb of about 18 percent. It seems plausible that over time, the breakout could fuel further gains duplicating the previous rally, adding on another 15 percent to 20 percent, taking the share price to nearly $300.
Morgan Stanley Can Continue To Rise
Morgan Stanley recently broke out, rising above $52, and it seems likely the stock could continue to climb as well. There is a minor resistance level about 3 percent higher at $55.25, but there is also room for the stock to rise to nearly $69. That's a gain approaching 30 percent from the investment bank's current price of roughly $53.50.
Bank of America On To $40?
As noted previously in an Investopedia article, shares of Bank of America could be on their way to nearly $40, a rise of about 36 percent from the current price of about $29.30. The stock just continues to clear levels of resistance passing the last one around $28.50. The stock has very little resistance in its path from its current level.
Banks have been leading the market higher for the past three weeks, and given the recent momentum, that seems unlikely to change in the final two weeks of 2017.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.