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The Future Is Cloudy for SunTrust (STI)

A head-and-shoulders top points to downside


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.

SunTrust (STI) -- Short

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

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