The best swing trading strategy in stocks is coming from the financial sector right now. Several banking stocks look like good swing long setups after JPMorgan and Citi crush estimates.
Banking Stocks and the Best Swing Trading Strategy
In a stock screen of recent pullbacks in the strongest stocks in the market that are still near their 20 day high, banking stocks were the common theme.
Specifically, this best swing trading strategy screen is scanning for:
Price: Above 20, Average Volume: 50 SMA > 20K, Near 20 day High which limits the maximum distance to the 20 day high to 5%, Price Below SMA 10, Price Above SMA 20.
Citigroup presents a good setup pattern. Prices have been consolidating lately and the volatility has been reduced. A pullback is taking place, which may present a nice opportunity for an entry. There is a resistance zone just above the current price starting at 67.45. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 65.75, a stop order could be placed below this zone. Notice how well pocket pivot signals (blue dots) have given good entry points for swing long trades.
CNA Financial Corp
CNA is showing a decent setup pattern. Prices have been consolidating lately and the volatility has been reduced. There is a resistance zone just above the current price starting at 49.03. Right above this resistance zone may be a good entry point.
BANF presents a decent Symmetrical Triangle setup pattern. We see reduced volatility while prices have been consolidating in the most recent period. There is a very little resistance above the current price. There is a support zone below the current price at 98.69, a stop order could be placed below this zone.
You can find out more about how to use the best swing trading strategy screener here.
The US economy is healthy enough to absorb gradual rate increases and the reduction of the Federal Reserve’s balance sheet, Fed Chair Janet Yellen testimony before Congress on July 12, 2017.
Federal Reserve Chair Janet Yellen told Congress on Wednesday that the bank hopes to keep raising a key interest rate and also intends to begin this year, the reduction of its bond holdings.
Yellen took note of several factors, such as household wealth and job gains that she said should fuel growth.
In what could be one of her last appearances on Capitol Hill, Yellen portrayed a market that, while growing gradually, continued to add jobs, gained from continuous household consumption and a recent leap in business investment, and was currently being supported too by stronger economic conditions overseas.
She blamed the economic slowdown in the first half of 2017 on inflation. She said Fed officials are watching developments closely to be certain price gains go back toward the 2 percent inflation target of the Fed.
Janet Yellen Testimony Freak Out Over Inflation
Janet Yellen seemed a little freaked out over the big drop in inflation over the last few months.
I take Yellen’s comments on inflation to mean that the economy should not have the CPI plunging in this part of the economic cycle. In fact, just the opposite should be occurring. But she added that it was considered by officials as an anomaly; inflation is predicted by the Fed next year.
Many economists believe the Fed, which has raised rates three times, will increase rates yet another time this year.
The Fed continues to anticipate that the development of the market economy will justify gradual increases in the federal funds rate over time while reductions in the Fed’s holdings of more than $4 trillion in securities will probably start “this year”.
In her prepared testimony before the House Financial Services Committee, Janet Yellen testimony repeated the message she’s been sending: the market has improved enough that it no longer requires the support the central bank began providing in 2008 in the aftermath of a serious financial crisis and the deepest recession since the 1930s.
In light of the continuing expansion, the Fed plans to keep raising its benchmark rate of interest and to lower its investment holdings, Ms. Yellen said in prepared testimony. She did not offer details concerning the time of the next actions of the Fed. Analysts expect the Fed to begin shaving its bond portfolio before the end of 2017.
The economy began the year with a slow growth rate of just 1.4 percent, it has regained momentum in recent months, aided by strong job gains, a revival of business investment and a strengthening of international markets.
Bottom line: the market is at full employment and the Fed is moving rates. As the Fed reinvests some of the bond holdings which mature monthly, they will decrease that reinvestment to reduce their balance sheet which will mark the beginning of QT (quantitative tightening). Many believe that QT began this year when the Fed did a series of rate hikes.
The Fed needs to keep policy accommodative to keep on supporting the recovery, but may hit a “neutral” rate quicker than anticipated. Estimates are that inflation has been dropping so fast that we could be near zero right now. Yellen has said the Fed expects estimates of the inflation rate to grow over time.
Yellen said in her testimony that as it stands rates “might not need to rise all that much farther” to reach neutral.
Yellen said growth remains moderate with business investment and consumer spending picking up, and the US economy is benefiting from growth in other countries too.
A strengthening in economic development abroad has provided significant support for U.S. manufacturing production and exports, Yellen said.
The Fed slashed its key policy rate to near zero to fight the worst economic recession since the 1930s, and kept it there for seven years before nudging it higher in December 2015. It left the rate unchanged before increasing it again in December 2016, March 2017, and June 2017 of this year.
At its June meeting, the Fed indicated that it expected to start decreasing its $4.5 trillion balance sheet after this year, a measure that could put slow upward pressure on longer-term prices for such things as home mortgages.
Yellen said, the market seemed to be in a virtuous loop of hiring, investment and spending which should increase resource usage somewhat further, thereby fostering a quicker rate of wage growth and price increases.
The Janet Yellen testimony was fairly uneventful except for her comments on falling inflation which seemed to baffle the Fed as to why this was happening at this point during the economic cycle.
On Wednesday, the Fed said banks such as JPMorgan Chase & Co and Bank of America Corp, had passed the second, more demanding part of its yearly stress test. The results demonstrated that many haven’t only built up adequate capital buffers, but improved risk management processes too. Charts of the best bank stocks to buy now are below.
It was the first time in years of annual “stress tests” that each bank assessed by the Fed won approval for its capital strategies.
Fed Governor Jerome Powell, who’s acting as regulatory guide for the U.S. central bank, said the process has inspired all the largest banks to attain good capital levels.
The Fed on Wednesday announced the results of the second round of its yearly stress tests. Those permitted to increase dividends or repurchase shares contain the four largest U.S. banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo. These large banks are the best bank stocks to buy now.
Following the results today, numerous banks quickly jumped in with announcements of dividend boosts and share buyback plans.
The second part of this seventh annual check-up tested the banks to decide if their existing plans for paying out capital to shareholders would still let them keep lending if hit by another financial crisis and serious recession.
Banks have a total of approximately $1.2 trillion in capital reserves as of the fourth quarter of this past year, an increase of $750 billion over 2009. They’re expected to pay out to shareholders 100 percent of the net revenue during the next four quarters, compared with 65 percent in the same period last year.
Best Bank Stocks To Buy Now
Bullish Pocket Pivot pattern on June 28, 2017. Feels a little like chasing at this level. I would prefer to wait for a consolidation move before taking a swing long entry.
Powerful breakout move but chasing breakouts is a losers strategy. I would prefer to wait for a pullback at least a consolidation period before taking a long entry.
I like the sideways consolidation pattern in Bank of America. We also had a bullish Pocket Pivot signal on June 28, 2017.
Wells Fargo has major resistance at $55. An entry above this level is prudent. The Twiggs Money Flow is just starting to round up so it has less of a chasing feel to it.
I will keep hunting for the best bank stocks to buy now.
The central bank balance sheet reduction could crash the market according to David Quintieri (link above). The Fed is engaging in its most dangerous policy move in the last 10 years with its simultaneous moves to raise rates and to unwind its $4.5 trillion balance sheet.
One of the things I don’t understand about this unwinding move from the Fed is who will buy all that toxic debt? If memory serves me correctly, most of the Fed’s balance sheet is garbage toxic debt (mortgage-related securities) that no one wanted to buy and to divert a complete crash of the US economy almost 10 years ago, the Fed swooped in and bought this radioactive toxic debt. Who would want to buy this debt?
Central Bank Balance Sheet Reduction
My own economic ignorance aside as to who would be willing to buy this toxic debt from the Fed, the Fed has never before had to find buyers to shrink its balance sheet. The unwinding of the Fed’s balance sheet is going to be a big challenge IMO.
Current US law states that the Federal Reserve has to be reimbursed by the US Treasury once it realizes the losses by selling the bonds. Interest rates are going up so central bank balance sheet reduction must take place. If the Fed sells a bond at a loss, that loss must be reimbursed to the Fed by the US Treasury. Congress has to send the Fed the money it lost. Congress needs to raise the debt ceiling to a high enough level to reimburse the Fed for its losses on the toxic mortgage backed securities it sells. In other words, central bank balance sheet reduction adds to the national debt.
Lots of China debt is not backed by collateral even though accounting records and bank records show the debt is backed by collateral according to a new report by Reuters (link above).
When a Chinese bank makes a loan, auditors will go to a site to make sure that the collateral is there. The problem is that the collateral is often moved so that it simply vanishes when a bank goes to seize collateral after a bank loan goes bad.
The collateral is moved around to secure loans from multiple lenders. Reuters reports that a lawyer discovered that the same pile of steel was used to secure loans from 10 different lenders.
China Debt Secured By Missing Collateral
US investors and traders have known about China’s ghost collateral problems since 2014. The fact that much of China’s debt is unsecured is one of the reasons why I stay away from investing in Chinese companies via ADR listings in US markets.
Folks, much of China’s incredible loan origination growth has been built on nothing but hot-air. Hundreds of billions of dollars (maybe trillions) worth of loans are fraudulent as the collateral underwriting that China debt has been rehypothecated (like the Fed’s gold scheme) between many different debtors. If the Chinese economy suffers a hard-landing, banks will not be able to recover much of the pledged collateral. This will cause the hard-landing to spread outward like a tsunami through the financial banking system and China will be faced with a crisis like the 2008 global financial crisis.
The 2008 global financial crisis was the result of lax lending standards and overvalued collateral (i.e. houses). When the value of houses fell in the U.S., there wasn’t enough collateral to back the highly leveraged lending in subprime mortgages and the entire financial system collapsed. China is now facing its own collateral crisis with Moody’s downgrading China for the first time in 28 years. I wonder what debt rating agencies are going to rate China debt now that everybody knows that much of that debt lacks genuine collateral?
Just like our financial crisis in 2008 pulled down the rest of the world, so too will China if their financial system collapses.
January 17, 2017: UBS signs multi-year agreement valued at over $300 million with EPAM. UBS AG, the world’s largest wealth manager, has signed a multi-year strategic framework agreement. For the past nine years, UBS and EPAM have collaborated to stay at the forefront of technology, positioning UBS as a global leader in innovative financial products and services. The agreement, which is valued at over $300 million, supports the bank’s strategic cost reduction program. This commitment to efficiency allows EPAM to continue to focus on innovative, end-to-end solutions, reducing time-to-market and improving ROI on technology investments.
The partnership between UBS and EPAM spans almost nine years, ten countries and three continents. In addition to the many business solutions that EPAM has provided during this relationship, innovation will be a large focus throughout this multi-year deal.
Established in 1993, EPAM Systems, Inc. is recognized as a leader in software product development by independent research agencies. Headquartered in the United States, EPAM serves clients worldwide utilizing its award-winning global delivery platform and its locations in 19 countries across North America, Europe, Asia, and Australia. EPAM was ranked #6 in 2013 America’s 25 Fastest-Growing Tech Companies, and #3 in 2014 America’s Best Small Companies lists by Forbes Magazine.
First Internet Bancorp is the parent company of First Internet Bank, which opened for business in 1999 as the nation’s first state-chartered, FDIC-insured institution to operate solely via the Internet. With customers in all 50 states, First Internet Bank offers consumers services including checking, savings, money market, certificates of deposit and IRA accounts as well as consumer loans, residential mortgages, residential construction loans and home equity products.
Franklin Financial Network provides various banking and related financial services to small businesses, corporate entities, local governments, and individuals.
Franklin Financial Stock Chart
Chart Comments: Testing previous resistance at around $38. Inverted hammer with long upper shadow is bearish and may indicate a pullback is coming. Wait for close above $38 before long entry. Twiggs Money Flow is pulling back a little but still above 0% line. Watch where next low on Twiggs Money Flow forms, bullish if following low forms above 0% line. Big insider buying on November 21, 2016, this is the first insider buying since May of 2015. Excellent revenue and earnings growth. Attractive valuation of P/E 16.7 and forward P/E 13.4. Piper Jaffray just began coverage on November 22, 2016, with an Outperform rating.
Disclosure: I do not hold any position in this stock.
Whether we are talking about individual stocks, the stock market, or the economy, when you’re wrong just admit it and then move on. The goal is to make money, not to be right 100% of the time so you can stroke your ego.
AM TV and Peter Schiff predicted that the Federal Reserve could not stop their monthly QE injections into the economy. Even though the Fed kept cutting the monthly injection all the way down to zero, alternative media outlets AM TV and Peter Schiff kept saying the Fed wouldn’t stop the monthly infusions because they couldn’t as the patient (the economy) would die. Peter Schiff then went on to say that the Fed was not going to hike rates in December 2015 but instead actually cut rates. The Fed increased rates a quarter point right on schedule. For all of 2016, Peter Schiff has been saying that the Fed isn’t going to hike rates again but instead reverse course and lower rates. In December of 2016, the Fed will likely increase rates another quarter point.
Most alternative media outfits think they have to be crazed perma-bears to get viewers. Maybe they do. Rather than AM TV and Peter Schiff admitting they were wrong about the Federal Reserve, they double down on their wrong predictions and do another “interview” together, check it out.
There are some really good points in this interview, don’t get me wrong. However, to be a successful traders and investor, you can never be a perma-bear. You can never be a perma-bull. You have to adapt and respond to market conditions. That adaptation means you have to be willing to admit when you’re wrong and then to just move on.