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Trade of the Day: Hudson City Bancorp (HCBK)

Regional banks offer the best leverage on domestic strength


The economic data in the United States certainly appears to be swinging back toward pre-crisis levels. Bespoke Investment Group looks at 40 economic indicators every month and scores them on whether they are stronger or weaker than the prior month. A year ago, the net was a -12 result. Six months ago, the net was -6. Three months ago the net was -11. But now, the net is +12, as all kinds of data are flashing green, including consumer confidence, personal income, retail sales, housing starts, jobless claims, durable goods, nonfarm payrolls, inflation and consumer spending. In just the past week, of the 16 data points released, ten were better than expected, five were weaker and one was neutral.

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Bespoke also notes that pickup truck sales tend to be a good economic indicator all by themselves because they show strength or weakness in small U.S. business growth and construction. It was great to see Ford (F) report strong F-150 sales last week; they were up 20% in June to 68,000, the largest total since 2005! Moreover, the year-to-date total is now back to 2006 levels.

In short, the economy slowly but surely appears to be normalizing. Now, if only the rest of the world would cooperate.

In any case, I’m sticking to names focused on the U.S. economy, and there is very little that is more leveraged to the domestic market than regional banks.

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Hudson City Bancorp
 (HCBK) is a $4.5 billion regional bank that is based in New Jersey. Shares shot higher by nearly 1% yesterday, and the stock has gone vertical when viewed from a daily perspective. But as you can see in the second chart, from a weekly perspective, it is just emerging from a five-year wipe-out.

Recommendation: Buy HCBK for a target of $10.25. Let’s see if bulls can take shares to that level, where there is resistance dating back to January of 2011.

InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage, which aims to capture profits of 15% to 40% and often as much as 100% to 200% in less than 90 days. 

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