3 trend-bucking picks

Regional banks have survived the worst of the mortgage and credit crisis. Here are a trio of opportunities in this sub-sector.

By MoneyShow.com Jun 26, 2013 4:56PM

Image: Stocks circled in newspaper (© Digital Vision/Getty Images)By Tom Aspray, MoneyShow.com


The stock market rebound on Tuesday helped calm the very nervous bulls, and the futures were higher again in early Wednesday trading. This rebound can clearly go further but the daily technical studies still suggest that this rebound is likely to be followed by another round of selling.


The good news is that the seasonal pattern does favor a higher market in early July and, secondly, not all stocks or industry groups bottom at the same time. Though one does not want to be an aggressive buyer when the market is still correcting, one should not miss an opportunity to put their high cash levels to work.


In this type of environment, I look for stocks or ETFs where the weekly OBV confirmed the most recent highs and those that are outperforming the overall market. This ETF and both of these stocks meet this criteria and should be bought at the right price but not chased.


chart
Click to Enlarge


Chart Analysis: The SPDR Regional Banking ETF (KRE) has assets of $1.49 billion and currently yields 1.78% with an expense ratio of 0.35%.  It is quite diversified, with over 70 regional banks and the top ten holdings make up less than 20% of the fund.

  • The daily chart shows that it completed its flag formation (lines a and c) with Tuesday’s close.
  • The formation has initial upside targets in the $35 area.
  • The breakout has been confirmed by the technical studies as the relative performance broke through resistance (line d) last Thursday.
  • The RS line is rising very sharply and the weekly (not shown) is also positive.
  • The volume was heavy Tuesday as the OBV has slightly overcome the resistance at line f.
  • The weekly OBV is also holding well above its rising WMA so the OBV multiple-time-frame analysis points higher.
  • There is initial support at $32.40 to $33 with stronger at $31.40-$31.80.

MB Financial Inc. (MBFI) is a $1.41 billion regional bank headquartered in Chicago that currently yields 1.6%.

  • The daily chart shows a trading range (lines h and I) since early May.
  • This is likely a continuation pattern that will be resolved to the upside.
  • The initial upside targets are in the $28-28.50 area, which corresponds to the 201 highs.
  • In 2008, MBFI traded as high as $44.41.
  • The daily relative performance has already broken through its resistance at line j, indicating it is a market leader.
  • Last week there was a big-volume day, and the OBV has just moved above the resistance at line k.
  • Both the week RS and OBV analysis (not shown) are also positive.
  • Initial support at $25.40-$25.80 and then in the $24 area.

chart
Click to Enlarge


M&T Bank Corp. (MTB) is a $13.83 billion northeast regional bank holding company that currently yields 2.60%. It closed strong Tuesday as the May 22 high was overcome.

  • MTB has been in a trading range, lines a and b, for the past eight months.
  • A close above $108 would be an upside breakout with upside target from the formation in the $119-$120 area.
  • In early 2007, MTB made a high of $125.13.
  • The relative performance has broken its long-term downtrend (line c).
  • The RS line is well above its rising WMA and the weekly (not shown) is also positive.
  • The daily OBV is now testing its resistance (line d) and shows a positive uptrend (line e).
  • The weekly OBV (not shown) closed above its WMA last week.
  • There is initial support at $106-$106.50 with monthly support for July at $102.76.

What it Means. The weekly and daily analysis of this ETF, as well as these two banks, does indicate they are likely to be the market leaders in the coming months. If our buy levels are not hit Wednesday, then they may be on the next pullback in the overall market.


The SPDR Regional Banking ETF looks the most attractive because of its diversification. MB Financial has some good upside potential if you can get long before it breaks out to the upside, but I would only buy M&T Bank Corp. on a decent pullback.


How to Profit: For SPDR Regional Banking ETF  go 50% long at $33.11 and 50% at $32.46, with a stop at $31.63 (risk of 3.5%).


For MB Financial, go 50% long at $25.86 and 50% at $25.48, with a stop at $24.28 (risk of 3.5%).


For M&T Bank Corp., go 50% long at $105.62 and 50% at $104.57, with a stop at $99.33 (risk of 5.5%).


MSN Money on Twitter and Facebook

Like us on Facebook: MSN Money and Top Stocks

Follow us on Twitter: @msn_money and @topstocksmsn

Tags: etfMTB
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125
125 rated 1
267
267 rated 2
455
455 rated 3
612
612 rated 4
682
682 rated 5
695
695 rated 6
632
632 rated 7
472
472 rated 8
279
279 rated 9
147
147 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
VZVERIZON COMMUNICATIONS9
TAT&T Inc9
CTLCENTURYLINK Inc8
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.