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!

Right about here, my attorney would want me to remind you this is not an investment recommendation — nor is anything on pebblewriter.com.  Investing is risky, and options are a particularly effective way to end up living in a van down by the river.  For full risk advisory and other legal disclosures, read this.