Global markets are under historic pressure on Friday after voters in the United Kingdom surprised the world with a decision to leave the European Union after more than 40 years of membership.
And by all accounts, the pressure is set to continue as the eight-year-old bull market faces its most serious existential threat yet. This is despite aggressive efforts by central bankers and other policy officials to bolster sentiment overnight with promises of dollar swap liquidity and vague reassurances to lean against chaotic currency market volatility.
To say this result was unexpected — a rejection of the post-war era of globalism driven by anger over immigration, stagnant economies and unaccountable bureaucrats in Brussels — is a massive understatement. Betting markets had the odds of remaining at around 90% on Thursday. The Dow Jones Industrial Average enjoyed a cute surge back above the 18,000 level into the close.
By early Friday morning, the smell of panic was in the air.
European bank stocks — the epicenter of all of this because of their European bond holdings and exposure to the local economy — are being crushed. But American banks look vulnerable as well on currency market volatility, compressed long-term bond yields and equity market weakness.
Here are three bank stocks that look good for new short or put option plays.
Bank Stocks to Short: JPMorgan Chase & Co. (JPM)
JPMorgan Chase & Co. (JPM) has collapsed below its 200-day moving average on Friday, ending a three-month-long consolidation by breaking below support near $61.
This also ends the six-month uptrend for the stock that started in January. And it represents a failure to overcome resistance from the November-December highs.
I have recommended the July $60 JPM puts to my Edge Pro subscribers.
Bank Stocks to Short: Bank of America Corp (BAC)
Bank of America Corp (BAC) shares have fallen below their mid-June lows to return to levels not seen since April after being turned away from their 200-day moving average earlier in the month. If current support levels don’t hold, watch for a fall to test the February low near $11 — which would be a 15%-plus decline from here.
The company will next report results on July 18 before the bell. Analysts are looking for earnings of 37 cents per share on revenues of $21 billion.
Banks Stocks to Short: Citigroup Inc (C)
Citigroup Inc (C) shares have dropped back to their early April levels after being turned away from its 200-day moving average near $48 back in late May and early June. A drop back to the February low near $35 would be worth a near-13% loss from here.
The company will next report results on July 15 before the bell. Analysts are looking for earnings of $1.14 per share on revenues of $17.8 billion.
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. As of this writing, he did not hold a position in any of the aforementioned securities.