The past several day market rally has caught many "flat-footed" to be sure as traders head into year-end. Moreover, the prospects for further gains are rather high; hence we're likely to see many traders attempt to play "catch-up". This begs the question as to what sector may be one of the "surprise performers" and offer both absolute and relative performance. To us, the Financials and the Banks in particular are "under-loved" and quite "under-owned" - hence they fit the bill for those traders looking for leverage.
Technically speaking, the Banking Index is on the precipice of breaking out on an intermediate-term basis above its bottoming 130-week moving average. In the past, this moving average has served as a fulcrum point, and if this current bullish technical setup extends higher - then we'll see higher banking stock prices in the near-and-intermediate term. We think this is an "out of consensus call", which given the potential inflows of capital into the beleaguered sector - could result in outsized gains in the weeks and months ahead. Our favorite bank stocks are JP Morgan (JPM), PNC Financial (PNC), US Bancorp (USB) and First Horizon (FHN).
Good luck, and good trading!
