2 When things are really cooking for me, I feel a sense of familiarity with the market. In those moments, I’m able to clear my head of the noise, and hitch a ride with the market and let it take me wherever it wants to go. Currently, there is enough evidence to convince me that, at least in the short term, the market is headed lower (to at least test the lows put in last week).
Last night I detailed my strategy for a put option position that I opened in $HON. Tonight, I’m going to take a look at a few bank stocks to see if we can come up with some decent short candidates. Banks are in focus because, quite frankly, their recent performance has been pathetic. In the wild, wounded prey is easier to kill…banks aren’t exactly carrion, but they better find cover soon.
Let’s start with $CMA. This ran from the high 22’s in late November all the way to 34 in March. Almost a 50% gain in 4 months, from a bank no less, seems a little overdone. I like this to go higher in the long term, but I’m not concerned with that at all this evening. I have mentioned it before, but when I short, I’m looking to be in the trade no longer than 5 days. I’d have a ‘stop’ right around 31 and be looking to get the hell out of there with my $$ if it gets in the 28.5 range.
Next up: $STI. This saw an even more ridiculous increase in price over a shorter amount of time (58%, 3 months), therefore I see no reason why this stock can’t trade back down to 20 in the coming weeks. Right here it looks ripe for a short. That said, I wouldn’t hesitate to cut it loose on a rally above 23.25. The July 23 puts are where I will park my money should I pull the trigger.
$WFC: The move lower could be a headfake after price finally broke out of that 2 month channel. I never, ever trust the first move out of a long consolidation like that. In this case, this is really a make/break kind of moment for the stock, if it can’t climb above and hold 32 with any sort of conviction, I see lower prices in the future. There is a very liquid option market on this stock, so you can take your pick of month/strikes. I like the July 33 puts.
Just a couple of ideas to chew on.
My best to you all.
-EM
2 Responses to “About the Banks”
ALEX
Fly you making a mistake buying puts on STI.
elizamae
Hah, while I’m extremely flattered that you would mistake my prose for Fly, your lack of awareness regarding who authored this post is enough to disqualify your financial ‘advice’ on that error alone.
Good day to you.