Only one bank stock looks qualified to meet as financials gear up for earnings: Technical analyst

The bank bonanza is about to start. Citigroup, Wells Fargo and J.P. Morgan Chase will kick off earnings season on Tuesday, their quarterly outcomes marking the beginning of a bank-heavy reporting interval that may see different giants together with Bank of America, Morgan Stanley and BlackRock share their outcomes from final quarter.

However solely one banking stock stands out as a purchase among the many largely overheated group, Mark Newton, president and founding father of Newton Advisors and a longtime chart analyst, instructed CNBC’s “Trading Nation” on Friday.

“One stock … that has shown some pretty decent signs of strength of late has been Goldman Sachs, which is really not near former highs, but just starting to show much better signs of acceleration,” Newton mentioned, pointing to its weekly chart.

In contrast to Citigroup and Bank of America, that are nearing their 52-week highs, Goldman’s stock remains to be bucking the broader pattern within the Monetary Choose Sector SPDR Fund (XLF), which tracks the group and is sitting at its highest stage since 2007, Newton mentioned.

“Some of the brokers, I think, are a little more interesting in terms of what to buy heading into earnings. I would buy Goldman Sachs before I would touch things like Bank of America or Citigroup,” Newton mentioned. “I think Goldman can potentially get back towards former highs, but this group as a whole has been under pressure, it’s an underperformer and my thinking is it’s right to really hold off for now, for the most part.”

Goldman closed down by lower than 0.5% on Friday at $242.11. John Petrides, portfolio supervisor within the wealth administration division of Tocqueville Asset Administration, took the opposite aspect of the coin. “The large U.S. money centers are quite attractive,” he mentioned in the identical “Trading Nation” interview. “Remember, the outperformance that we’ve seen [in the financials] was really the last quarter.

For the first nine months [of 2019], the sector was a relative dog,

particularly when the yield curve inverted back in August.” The financials completed 2019 as the yr’s third-best performing sector, giving Petrides hope that the massive banks would use the constructive momentum properly this quarter. “What I’m focused on in the upcoming earnings is how the banks are going to deploy their capital: one, reinvesting in their business as they become more fintech-focused and try to continue to survive in this low-yield environment, and the second is the banks are flush with cash. They’re going to be returning a ton of that to shareholders,” the wealth supervisor mentioned. “They’re increasing their dividends and buying back stock,” Petrides mentioned. “The banks do have a new accounting feature this upcoming year. They have to report CECL, current expected credit losses. That’s going to add some noise to the upcoming earnings calls, but by and large, I think the banks are still attractive longer term.” The XLF ended buying and selling Friday down lower than 1%. The SPDR S&P Bank ETF (KBE), which tracks the banks extra broadly, was down simply over 1%. Disclaimer

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