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History/Trading Style: I have been trading for 11 years, since I was 15, and have studied a variety of trading techniques and strategies. I combine many trading philosophies and combine technical analysis, fundamental analysis, and macro-economic analysis into every trade. I mostly trade options... More
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Options Hawk
  • Regional Banks: Massive Short Squeeze Underway 0 comments
    Aug 3, 2009 12:49 PM | about stocks: KRE, PVTB, FMBI, WTFC, CBU, TRST, CVBF, EWBC, WABC, UMPQ, SIVB, BXS, IBOC

    I recently have been noting the strength in regional banks, often tracked via the ETF KRE, which has closed higher for 8 straight sessions.  The weekly chart shows a triangle setting up that could result in a breakout at $21, and lead to a massive short squeeze that sends this ETF 50% higher to $31.50.

    After a quick scan of the most shorted regional banks the following list came up, and a simple view of the charts shows the massive short squeeze underway.  The following names are the most shorted regional banks with bullish chart patterns: PVTB, FMBI, WTFC, CBU, TRST, CVBF, EWBC, WABC, UMPQ, SIVB, BXS, IBOC, and PRSP.  Many of these names have a short ratio of more than 12 days to cover, and more than 20% of the flaot.

    Regional Banks was an underperforming group for awhile on multiple media reports that there are more bad assets remaining on the balance sheets and liquidity is going to be a continuing concern.  Also, exposure to commercial real estate is supposed to be detrimental.

    However, it seems that sentiment is shifting as shorts begin to cover and the group starts to outperform. 

    Owning one or more of these banks can lead to some sharp moves higher, and the group has to play catch up on the 50% rally in the markets, that will be further exacerbated by the short covering. 

    Disclosure: No Current Holding
    Themes: Regional Banks, Long Ideas Stocks: KRE, PVTB, FMBI, WTFC, CBU, TRST, CVBF, EWBC, WABC, UMPQ, SIVB, BXS, IBOC
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