Banking on Banks?

With 49 companies in the S&P reporting this week, it’s safe to assume that earnings will be front and center and likely shape the intermediate direction of the market. This is a fun time for day traders and often an anxious few weeks for swing traders. With the basic premise of swing trading to let winners run, a set of bad earnings reports can destroy a portfolio (of course it can make it fly, as well). For me, I’ll stick to primarily day trades and limit swings to only a few (at most) per day. I also have a personal rule to not hold stocks into earnings. I’m one who likes to control risk and holding a stock when they announce results is probably the riskiest simple trade you can make. So, let’s focus on my shortened week plan…

First, I want to watch the financial sector – So far, the banks have had a pretty good year and there is a lot of chatter that this could be the year of the banks. If that’s the case, we should see some clues this week from BAC and C. We’ve already seen beats JPM, MTB, CBSH, and WBS. With these reports already favorable, it’s likely we’ll see more of the same this week. The big hitters are C and SCHW on Tuesday. BK, USB, and WFC on Wednesday. FITB, HBAN, MS, COF on Thursday. And BAC on Friday. If the week starts off strong with C, I might look at playing the BAC anticipation for Friday. In other words, buy the rally into BAC earnings and sell just before. So, that’s strategy #1 – buy moves into earnings on Thursday and Friday if Tuesday and Wednesday look good for this sector.

I’m also going to look at the laggards and jump in the sector rising tide approach – find the stocks that are not as front and center in the news and trade them based on C, BAC and others. Good examples here are high beta regional banks. Here are a few I’ll have my eye on based on good volume action, and technical setups:

HBAN – reports on Thursday, so I’ll look to add Monday and sell before earnings.

UCBI – Looks like a little resistance at 1.93, but could make for a great scalp this week on bank momo.

SNV – The daily chart has become a little congested over the last few weeks, but a move through 2.80 is worth watching on positive MACD cross.

FITB – One of my favorite regional bank setups headed into earnings. FITB reports on Thursday and could very easily breakout before.

PVTB – breaking through horizontal resistance at 15.

USB – over 27.50 for next leg.

HAFC – Nice triangle forming on SMA100. This stock has been beaten down over the last year and is primed for a nice pop – more likely a scalp than a comfortable swing. UMPQ has a similar setup worth watching, as well.