The Future Is Cloudy for SunTrust (STI)

A head-and-shoulders top points to downside

   

The Future Is Cloudy for SunTrust (STI)

SunTrust (STI), one of the largest regional banks in the U.S., focuses on the Southeast and D.C. Although the bank has a relatively strong capital position, it is subject to possible declines in residential and commercial lending credit quality, according to Standard & Poor’s. S&P is expecting earnings of $3.11 a share in 2014 and $3.25 in 2015. With increased government regulatory requirements, STI could be subject to more scrutiny.

Technically STI has been trading in a narrow band between $38 and $41 since January, lagging other growth stocks. The overall pattern is that of a head-and-shoulders top with a neckline at $37.

sti short sale e1407197420129 The Future Is Cloudy for SunTrust (STI)

Yesterday the stock fell through its 200-day moving average, accompanied by an increase in volume and a bearish MACD indicator. A close under $37 would complete this ominous pattern with a downside target of $33.

As always, the short-seller should protect all positions with a stop-loss order. And short-selling should only be attempted by experienced traders. Check with your broker for special margin requirements and the ability to borrow stock.

chart key The Future Is Cloudy for SunTrust (STI)


Article printed from InvestorPlace Media, http://investorplace.com/2014/08/short-suntrust-sti/.

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