Donald Trump’s surprise win of the presidency was no doubt a boon for the financials, which led the market higher in the days following the election. But while the group has seemed to plateau since reaching yearly highs — the Financial Select Sector SPDR ETF (NYSEARCA:XLF) soared 11% in the first four trading days and has been relatively flat since — there’s one stock in particular that has kept the gains coming: U.S. Bancorp (NYSE:USB).
The day after the election, USB stock rallied through the $46.25 resistance level that it has failed at several times over the last two years. It was a huge-volume breakout, but I believe it was only the beginning of what is likely a longer-term bull run for the stock.
USB is one of the largest regional bank operators in the country, and stands to benefit greatly from both a rise in interest rates as well as the possibility of less industry regulation under a new Trump administration.
USB Stock Charts
USB stock also looks great from a technical perspective as it trades at all-time highs. However, it may have gotten a bit ahead of itself in the near-term.
Take a look at the Relative Strength Index (RSI) located at the bottom of the above chart. The indicator hit a one-year high of 88 last week as USB stock climbed the furthest above its 50-day moving average (the blue line) in years. The parabolic move was brought on by the perfect storm of the broad market rally, higher interest rates and Trump win.
Buyers rushed into this bank stock. But now it’s time for the shares to take a breather and consolidate as the short-term traders bank some of their profits.
Bottom Line
I suspect we’ll see a near-term pullback in the range of 5%, which would put USB stock right around $47. That’s important, because it would keep U.S. Bancorp above the new support level at $46.25 and still make for a healthy enough rest after such a major breakout.
If that happens and the support level holds, it would signal a great buying opportunity for both short-term traders and longer-term investors.
An added bonus is that USB stock pays a decent 2.3% dividend. That’s in line with the yield on the 10-year Treasury.
As is almost always the case with chart reading, the key is to be patient and look to buy on weakness ahead of a likely year-end rally.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.
