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Which US banks are Buys after their severe sell-off in May

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From Keris Lahiff:

Financials are surging for the second day in a row, coming back from their deep May sell-off.

The rally is just getting started, said Ari Wald, head of technical analysis at Oppenheimer, who upgraded the diversified financials industry group over the weekend.

“This is a play on cyclicals in general,” Wald said Monday on CNBC’s “Trading Nation. ” “These oversold conditions for interest rates, this is dry powder for cyclicals. Speaking in terms of the 10-year U.S. Treasury yield, the yield is currently over 60 basis points below its 200-day moving average — extremely stretched on the downside.”

The U.S. 10-year Treasury yield recently reached its most oversold condition since January 2015, Wald said. The benchmark bond yield has fallen from 2.42% to 2.14% in the past three weeks.

The move higher again should benefit high-beta stocks, he said, particularly the financials which tend to rise when the yield curve steepens. Longer-term bonds with higher yields than shorter-term bonds expand a bank’s profitability.

Wald is watching two of those stocks, in particular.

“The first one is S&P Global. The stock has had a fresh breakout above its 2018 high point at $215, typically the breakout point becomes support and on the upside we think that breakout measures to $260, ” he said.

“Second name, consumer finance company American Express. Here’s a stock that broke above 2018 resistance ahead of the market, now more recently getting above its May peak ahead of the market. Again, a sign of relative strength, a sign of leadership. These are names we expect continue to carry the market higher, ” Wald said.

Boris Schlossberg, managing director of FX strategy at BK Asset Management, sees a similar set-up as bond yields move back up.

“I think 2.10% [on the 10-year] was a near-term bottom and as the 10-year comes back up and goes to 2.50%, it’s going to be a natural re-steepening of the yield curve and I don’t think you really need to be that picky. Everything I think is going to go up and within that, I actually like J.P. Morgan, ” Schlossberg said during the same segment.

J.P. Morgan has outperformed the XLF financial ETF over the past three months, gaining 6% compared with the gain of 5% for the financials. The big bank is also up 5% this month.

“It’s done really, really well even in this difficult environment and I think if we get a tail wind as the yields start to widen again it’s only going to become more profitable for me. So I just simply like taking the JPM trade into this assumption that the 10-year yields are going to go back up. That’s going to be the key thing,” Wald said.


The Financial Select Sector SPDR ETF (XLF) fell $0.03 (-0.11%) in after-hours trading Tuesday. Year-to-date, XLF has declined -1.61%, versus a 8.69% rise in the benchmark S&P 500 index during the same period.

XLF currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 36 ETFs in the Financial Equities ETFs category.


This article is brought to you courtesy of CNBC .

You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)

The post Which US banks are Buys after their severe sell-off in May appeared first on ETF Daily News.



Source: https://etfdailynews.com/2019/06/11/which-us-banks-are-buys-after-their-severe-sell-off-in-may/
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