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1 Stock to Buy, 1 Stock to Short: Banks

These two banking stocks let you play the sector long or short


This weekend my Trending123 Pattern Scan software powered by Recognia lit up with some interesting banking stock trades. One is a Spanish financial group that, as you might expect, is doing pretty poorly, especially short-term, and the other is a U.S. stock that’s perennially popular and showing renewed strength.

Let’s get to the charts and the trades.

Buy the Ascending Continuation Triangle

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(NYSE:C) has developed an ascending continuation triangle over the past 41 days, making this a trade for the intermediate term.

In a continuation triangle, the increasingly higher lows and constant highs tell us that buyers are more aggressive than sellers. Citigroup is often one of the top names when it comes to call options volume, so this is no surprise. The pattern is confirmed when the price breaks through a resistance level to signal a continuation of the prior uptrend.

The pattern typically forms because a supply of shares is available at a certain price, represented by the upper flat line. When the supply depletes, the shares quickly break out from the top trendline and move higher.

Recommendation: Buy C for a $53.25 – $54.50 target.

Short the Bearish Continuation Wedge

5-10-13-bbvaBanco Bilbao Vizcaya Argentaria (NYSE:BBVA) is showing a continuation wedge in its chart that developed over the past 15 days.

A bearish continuation wedge shows that the prior downtrend is set to continue, after the temporary uptrend we’ve seen this May.  The pattern takes the shape of two converging trendlines, both slanted upward against the downtrend. During this time the bulls attempt to win over the bears, but in the end the bears triumph as the break below the lower trendline signals a continuation of the prior downtrend.

Recommendation: Short BBVA for an $8.60 – $8.90 target.

Want to learn how to rein in your subjective side to capture more profits? My colleague Jon Markman is hosting a free 30-minute webinar this Wednesday at 4:30 PM Eastern: Trade Against Your Gut: When Instinct is Your Worst Enemy.

InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the OpenParabolic Options and Trending123.  Trending123 members receive access to the Trending123 Pattern Scan powered by Recognia free as part of their membership. For more information on which service is for you click here.


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