Buy U.S. Bancorp (USB) Stock and Put It in a Drawer

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Shares of U.S. Bancorp (NYSE:USB) rallied Wednesday after the company reported second-quarter financials that pleased Wall Street.

beatthebell_185x185USB stock — which thanks to Wednesday’s move is now marginally back in the black for the year — is following a very similar path to other larger banking stocks. Namely, it’s continuing to show relative strength versus the broader market, and I believe it should be bought on any dips for a big rally into year’s end and possibly the first half of 2016.

Specifically, U.S. Bancorp reported adjusted earnings of 80 cents per share on revenues of $5.04 billion. The numbers were in line with analyst expectations, but USB showed nice commercial and industrial loan growth — something to like in a large regional lender.

On the below multiyear chart of the KBW Nasdaq Bank Index (BKX), we see that while the broader U.S. stock market is well above its pre-financial crisis highs from 2007-08, the banks still are well lower and thus have significant catching-up potential.

Also note that the BKX was largely stuck in a sideways trading range from the spring of 2014 until May of this year, when it released higher.

BKX chart
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While banks could endure some more volatility along with the broader market in the next couple of months, I do expect a big catch-up rally for the banks to unfold over the next six to 12 months.

USB Stock Charts

Looking at the multiyear weekly chart of USB stock, we see that it continues to hold its support line off the early 2009 lows, as each dip to this line has been bought. From a momentum perspective, the Relative Strength Index at the bottom of the chart has also made a series of higher lows since October 2014, which further supports a breakout rally that could see this stock well into the $50s over the next few months.

USB weekly stock chart
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On the daily chart, we see that Wednesday’s 3.76% rally was accompanied by big volume that pushed it past diagonal resistance from the December 2014 highs. Momentum is also nicely curling higher as the stock is trying to separate itself from the medium-term moving averages (50-, 100- and 200-day), which as a reflection of the trading range of late had been hugging each other tightly.

USB daily stock chart
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Active investors could look to buy USB stock on any consolidation and pullbacks into the $44-$45 area or begin building a small position at current levels. After some more broader market volatility in the August-September period, I see U.S. Bancorp having potential into the low $50s.

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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/usb-stock-u-s-bancorp-drawer/.

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