Trade of the Day: U. S. Bancorp (USB) Stock May Be Ready for a Fall

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.

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