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The financial sector is on the move, with the Financial Select Sector SPDR Fund (NYSEARCA:XLF) rising 0.7% to test the upper end of a long consolidation pattern going all the way back to December. It’s not a great day for bank stocks, but it’s a good one … and it could portend better things ahead.
The current move represents a nearly 10% gain from the recent lows set in May. But really, bank stocks have been mired in indecision over the past eight months over everything from the health of the U.S. economy, loan activity, the shape of the yield curve, and the success of investment banking activities in this environment.
The reporting of largely solid second-quarter results from the key players in the sector didn’t really move the needle. But now, with investors shying away from big-tech stocks on valuation and sentiment concerns, the big banks could be ready for a lift here. That’s on account of their large market capitalization weighting in the major indices — which are continuing their relentless march higher to incremental new records.
Here are three bank stocks to watch.
Bank Stocks With Breakout Potential: Bank of America (BAC)
Bank of America Corp (NYSE:BAC) reported earnings on July 18, including 46 cents per share in profits that beat expectations by a pair of pennies, and a 7.1% rise in revenues year-over-year.
BAC shares are rising off of short-term uptrend support near the $24-a-share level today, maintaining a positive stance above both the 50-day and 200-day moving averages. The March high lies just above at $25.50, which is a 4% move from here.
A breakout could return shares to levels not seen since the financial crisis meltdown of 2008. That’s boosting the Aug $25 BAC calls recommended to Edge Pro subscribers.
The company will next report results on Oct. 13 before the bell.
Bank Stocks With Breakout Potential: JPMorgan Chase (JPM)
JPMorgan Chase & Co. (NYSE:JPM) shares also are rising to test their prior highs from early July — also representing approximate resistance from its early March high as well — as the bulls try to put a definitive end to the eight-month-long holding pattern.
The company, like a handful of other bank stocks, benefited from some positive coverage in Barron’srecently on expected tailwinds from a deregulation push.
When JPMorgan last reported on July 14, earnings of $1.82 beat estimates by 23 cents on a 4.6% rise in revenues. Average core loans increased 8% from the year prior while net interest income jumped 8% on the impact from rising rates and loan growth.
JPM will next report results on Oct. 12 before the opening bell.
Bank Stocks With Breakout Potential: Citigroup (C)
Citigroup Inc (NYSE:C) shares are breaking higher to levels not seen since 2008 and ending a five-year stasis between $50 and $60. The late 2008 consolidation range near $80 is a likely upside target, which would be worth a 15% gain from here.
It’s probably just coincidental that the company felt confidence enough to hold an investor day presentation on July 25 for the first time since 2008, with management targeting a 15% to 20% earnings growth rate by 2020.
Citigroup will next report results on Oct. 12 before the bell. Analysts are looking for earnings of $1.31 per share on revenues of $17.75 billion. When the company last reported on July 14, earnings of $1.28 beat estimates by seven cents on 2% rise in revenues.