U.S. Bancorp (NYSE:USB) — On Oct. 13 I reviewed this Midwest bank and concluded that it should be bought by traders at $43 with a target of $50 within 90 days. On Dec. 20, the stock made a high at $52.68. In October, long-term investors were advised to “Note the Golden Cross buy signal in October, indicating a long-term change in trend has occurred” in this, the seventh largest bank (assets) in the United States with assets of about $454 billion.
USB is also considered the largest regional bank. However, even though Standard & Poor’s Capital has kept its “hold” opinion on the stock, it increased the stock’s 12-month target by just $2 to $52, which is 14.6X their 2017 earnings per share estimate of $3.55. In addition, the bank confirmed that the CEO will be replaced following the annual meeting in April.
Technically, USB is still in a long-term bull market, however it achieved our trading target of $50 and appears to have formed a “Rounding Top” with a neck line at $51. Since a Rounding Top is a form of Head-&-Shoulders bearish formation, I believe that traders who still hold this stock should sell it at the market, nailing down a profit of over 18%.
Those who decide to hold should enter a stop-loss order at $49, since a close under the 50-day moving average could result in a plunge to $46. Investors who understand the risk of owning a technically broken stock should accept the possibility that if the stock closes below its 50-day moving average, the trend could change to an “intermediate bear” trend, which could take a year or more to recover.
The comments section on InvestorPlace.com will be disabled starting Jan. 25, 2017. Readers who would like to comment on any of Sam’s posts can do so on Facebook or Twitter at @InvestorPlace. Or, share your thoughts or send us an email at firstname.lastname@example.org. Read more about our comments policy here.