4 Shaky Bank Stocks to Sell or Short

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bank stocks - 4 Shaky Bank Stocks to Sell or Short

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U.S. equities are under pressure on Monday as the post-Federal Reserve gains from last week — spurred by the as-expected “no hike” decision — are washed away.

big-bank-stocks

Some of this is apprehension over the Trump vs. Hillary presidential debate smack down now just mere hours away — with big-time policy implications for the future of the market and the economy as the polls suggest the race is now a dead heat.

But a bigger catalyst has been the reappearance of big-time regulatory risk for big bank stocks at a time when the sector has already been hit on concerns over profit margins and a possible hit to long-term government bonds related to Bank of Japan plans to lift long-term interest rates.

As a result, here are four stocks in the sector to avoid or consider for short-side or put option plays.

Shaky Bank Stocks to Sell or Short: Deutsche Bank (DB)

Bank Stocks Getting Slammed: Deutsche Bank (DB)Deutsche Bank AG (USA) (NYSE:DB) was slammed out of its three-month post-Brexit consolidation range on Monday after German Chancellor Angela Merkel was reported to have ruled out state assistance to the bank (though the German government dismissed said report).

DB is struggling amid a still slow eurozone economy, pinched net interest margins from the European Central Bank’s ongoing bond buying stimulus, risks from the looming U.K. exit from the European Union, and reports that the U.S. Department of Justice may seek up to $14 billion in sanctions related to sales of residential mortgage-backed securities.

Deutsche Bank’s stock is in free fall just months after management was forced to publicly defend its capital position.

Shaky Bank Stocks to Sell or Short: Goldman Sachs (GS)

Shaky Bank Stocks to Sell or Short: Goldman Sachs (GS)Goldman Sachs Group Inc (NYSE:GS) shares have fallen below their 50-day moving average and broken below their two-month trading range in sympathy with weakness seen across its sector group.

This is being driven by the hit taken by DB, but also a speech by Federal Reserve governor Daniel Tarullo that the largest U.S. banks should set aside a new capital “buffer” to protect them from market shocks.

Goldman Sachs will next report results on Oct. 18 before the bell. Analysts are looking for earnings of $3.77 per share on revenues of $7.4 billion.

Shaky Bank Stocks to Sell or Short: Wells Fargo (WFC)

Shaky Bank Stocks to Sell or Short: Wells Fargo (WFC)Wells Fargo & Co (NYSE:WFC) shares have fallen to test their February/June lows as political pressure builds against the bank and its management team amid the fallout from a scandal involving the creation of fake accounts to boost metrics and pay.

Also weighing on shares are the report of a push for higher capital reserves from the largest U.S. banks.

Wells Fargo will next report earnings Oct. 14 before the bell. Analysts are looking for earnings of $1.01 per share on revenues of $22.1 billion.

Shaky Bank Stocks to Sell or Short: Bank of America (BAC)

Shaky Bank Stocks to Sell or Short: Bank of America (BAC)Bank of America Corp (NYSE:BAC) shares have fallen below their 50-day moving average for the first time since July — breaking a four-month uptrend — amid broad selling pressure in financial stocks on Monday.

As mentioned above, regulatory pushback has been a driver, and BAC hasn’t been immune to it: The SEC just confirmed that the bank’s Merrill Lynch division has agreed to a $12.5 million penalty for causing “mini-flash crashes” in a number of markets.

The company will next report results on Oct. 17 before the bell. Analysts are looking for earnings of 34 cents per share on revenues of $21.1 billion.

A BAC put option position in the October contracts has been recommended to Edge Pro subscribers.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/4-shaky-bank-stocks-to-sell-or-short/.

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