pebblewriter

Tag: c

  • Financials: End of the Line, Again?

    Financials have had a great run ever since we called the June 4, 2012 bottom [see: So Crazy, It Just Might Work].  But, all good things must come to an end.  I’d give them another few days/points at most.

    I had jumped on the short side Mar 27, 2012 [see: End of the Line and Lots More], riding GS, MS and JPM down around 30%.

    JPM:       46 – 32 = 31%
    GS:       127 – 92 = 28%
    MS:    20 – 12.50 = 38%

    On June 5, we loaded up on the long side.  Our targets, as posted that day:

    JPM:  today’s close = 31.99, price target = 38.69 (+21%)
    C:       today’s close = 25.75; price target = 34.79 (+35%)
    BAC:    today’s close = 7.10; price target = 11.34 (+60%)

    Obviously, those targets proved to be a little conservative.  JPM reached its target by Aug 21, consolidated for 2 weeks, then zoomed even higher – reaching 49.31 today and finally (after 4 near misses) reaching the .886 retracement of its 53 to 14 plunge.

    C reached its 34.79 target on QE3 day (Sep 14 — lovely being able to dump all those crappy MBS on the Fed) backed off a few points, then proceeded to rally up to today’s high of 44.50.

    It only ever recovered 7.95% of its 2007-2009 plunge from 570 to 9.70 (adjusted for reverse splits) and is struggling to reach the .786 of its swan dive from Jan to Oct 2011: 51.50 to 21.4. If the .786 at 45.06 doesn’t do the trick, the .886 at 48.07 should.

    And, just today BAC came within a nickel of the 50% retracement (12.39) of its post-2009 high.  It reached our 11.34 target in mid-December.

    If it gets past 12.67, it could still take a run at 14.13.  But, it won’t be easy.

    Most of the financials are in a similar situation — at or near major resistance either from Harmonic or Chart Pattern targets.  But, it’s XLF itself that looks shakiest.

    Today, XLF reached an important channel line as it tagged the 1.618 of the Mar-June 2012 decline.

    If it sneaks up past current levels, the .382 retracement of the fall from 38.15 in 2007 is waiting at 18.21.

  • So Crazy It Just Might Work

    As a member correctly pointed out in his comment on XLF Update, a ramp in XLF would mean some big returns for important components such as BAC, C, JPM, etc.  This is very true.  Though it pains me to say it, I think banks are ready for a bounce.

    I sold all my remaining JPM, GS and MS puts today.  I jumped on the downside March 27 when JPM was 46 [see: End of the Line], GS was 127, and MS was 20 [see: Lots More Where That Came From.]

    I bought puts, but even straight-up short positions would have made some decent returns over the past nine weeks:

    JPM:       46 – 32 = 31%
    GS:       127 – 92 = 28%
    MS:    20 – 12.50 = 38%

    But, all good things must come to an end, and I think the tide is turning for financials.  Don’t get me wrong…I still think they’re dead meat in the longer term.  I just think we’re looking at a sizable bounce here and now if — and let me be clear, it’s a very important IF — the rumors are true and Kumbaya Banking and Quantitative Whatever are back.

    If not, this entire exercise isn’t worth the bytes it’s written with.  The financials, along with just about everything else Bloomberg quotes, will roll over and die.  OK, with that huge caveat out of the way — and before you laugh me out of cyberspace — here’s what I’m looking at.

    My targets are as follows…

    JPM:  today’s close = 31.99, price target = 38.69 (+21%)
    C:       today’s close = 25.75; price target = 34.79 (+35%)
    BAC:    today’s close = 7.10; price target = 11.34 (+60%)

    JPM:

    CITI:

    BAC:

    My favorite.  It starts with this little H&S pattern back in the 2007 market top.  Keep an eye on those ascending trend lines.

    Here they are again, on the bigger picture, along with some descending ones, and a nice little channel (red) that works pretty well since early 2009.  Couple of nice channels on the RSI, too.

    This one’s a bit of a long-shot, because it means breaking the red fan/channel coming down from the right shoulder up there, but the RSI channel makes me wonder if we might just make it up to that 61.8/1.618 Fib level.  If not, I think 8.89 is a safe bet.

    So, there you go.  Earlier today, XLF July 15 calls sold for .09 and the August 14’s went for .49.  If I’m wrong, they’ll probably go to negative eleventy-hundred.  Then again, it’s so crazy it just might work!

     

     

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