{"id":19311,"date":"2022-01-13T07:30:16","date_gmt":"2022-01-13T12:30:16","guid":{"rendered":""},"modified":"2022-01-13T07:30:16","modified_gmt":"2022-01-13T12:30:16","slug":"watch-the-banks","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/watch-the-banks\/","title":{"rendered":"Watch the Banks"},"content":{"rendered":"

Earnings season kicks off tomorrow morning when a handful of big bank stocks report their numbers.<\/p>\n

Expectations are high…<\/p>\n

Just about everyone is looking for solid results out of JPMorgan, Chase & Co, Citigroup, Wells Fargo, and the rest of the financial cartels. And, the stocks have all rallied in anticipation of bullish<\/a> announcements.<\/p>\n

The KBW Bank Index (BKX) is up 16% in just the past three weeks. It rallied in the face of last week’s broad stock market decline. And yesterday, the index notched a new all-time high.<\/p>\n

The problem with this sort of action, though, is that it sets up a “sell on the news” event…<\/p>\n

If investors have already bought the bank stocks in anticipation of strong earnings reports, then there’s nobody left to buy once those reports are issued. And, a little bit of selling pressure can cause a sharp decline in the stock prices.<\/p>\n

So, buying the banks right now seems a little risky to me.<\/p>\n

Just look at this chart of BKX…<\/p>\n

\"Chart\"<\/div>\n

BKX traded yesterday about 11 points above its blue 50-day moving average<\/a> (MA) line.<\/p>\n

That’s a relatively extended condition. BKX usually doesn’t stretch more than ten points from its 50-day MA before it reverses and moves back towards the line. So, it’s a bit overbought here.<\/p>\n

It’s more interesting, though, to look at the action on the chart going into earnings season last<\/em> January.<\/p>\n

Bank stocks enjoyed a strong rally back then as well. BKX stretched as much as 15 points above its 50-day MA line just before the big banks started to report earnings.<\/p>\n\n\n\n
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Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The reports were impressive back then. Most banks beat expectations, and most banks raised their estimates for the rest of the year.<\/p>\n

But look at what happened to the share prices… BKX tumbled 11% in the last two weeks of January.<\/p>\n

It was a classic “sell on the news” event.<\/p>\n

Just about everyone loves the bank stocks right now and is anticipating a stellar earnings season for the financial sector. And, given the price action of the past three weeks, just about everyone has been chasing the bank stocks higher.<\/p>\n

That’s a dangerous combination. To me, the sector looks vulnerable to a short-term pullback.<\/p>\n

Best regards and good trading,<\/p>\n

\"signature\"<\/p>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

What was a time that you followed a \u201csell on the news\u201d event?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This seems a bit risky…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19311","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19311","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19311"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19311\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19311"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19311"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19311"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19311"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19311"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19311"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19311"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}