The stress test results came out after hours Thursday May 7 and bank stocks were off to the races. The Fed is expecting the combined 19 banks will lose close to $600 Billion next year, and 10 of the nation's largest banks need to raise about $75 Billion in more capital.
It was announced that Bank of America (NYSE:BAC) needed the most additional capital and odly enough it was the company that traded highest after hours (up over 9%). We could see a very strong open, but it may die off mid to late day. Friday will be a great day to take some gains, if you really want/need to hold these stocks, you may find it useful to look into selling some out of the money covered call options on them for safety. I have some great covered call option strategies on my blog if you're interested. However some of these companies are in better shape such as Goldman Sachs, American Express, and Bank of NY Mellon, all of which don't need anymore additional capital. The top 5 banks out of the 19 which need the most capital from greatest to least are: Bank of America (BAC) $33.9 Billion, Wells Fargo (NYSE:WFC) $13.7 Billion, GMAC (NYSE:GMA) $11.5 Billion, Citigroup (NYSE:C) $5.5 Billion, and Regions Financial (NYSE:RF) $2.5 Billion.
A Quick Charting of the Major Banks: (click charts to enlarge)
AXP is currently in between its support and resistance, and with a good day should easily get to (if not break through) resistance at $30. If it breaks through $30 a share it could easily get to $34, and ultimately $36 short term. This is a very bullish chart, especially being in the middle of support and resistance, my guess it it will certainly get above $30 with the help of the market! Although Visa (NYSE:V) and Mastercard (NYSE:MA) are not exactly the same type of business as American Express, look for them to do well if AXP does.
Bank of America
BAC looks like it rallied through its resistance of about $14 after hours, next resistance comes in at $16 and then $18. If it breaks through $16 watch it closely as it may come back down quickly, if it bounces off support at $16 once through it is a very good sign, and could easily get to $18 short term.
Bank of New York Mellon
BK has a very sloppy chart (in terms of testing resistance/support). BK broke through its short term resistance today before sliding back down, and it created a double. As of the after hours trade BK is up, but not nearly as high as it traded Thursday morning. BK could potentially rally up to the $38 range but first must get through resistance at $35, then $36.50.
C looks like it also rallied through $4 after hours which is a critical point as from the chart you can see it has tried to break above it several times- I can count 5 very close to $4. However investors are still uncertain if the government will convert their preferred stock into common staking almost 50% in the company. However the faster they fall the faster they rise, and Citi could potentially get to $7.50 before running into any resistance at all, then $9, and then even $14.50 before it settles down. However Citi getting that hot is very unlikely as stated.
GS is a chart I like to see (especially as a shareholder). GS looks as if only two resistance points are in its way of getting back to $170 a share. The two come in at $140 and $151. If GS breaks through $140 anytime soon look for a quick rally to $151, and then if it can fill that gap up at $151 and break above it, watch and see how fast it can get to $170. Remember if they break through resistance, resistance now comes a support and if they break down through support they can easily get back down to where they came from.
JP Morgan Chase
JPM like BK broke its resistance Thursday morning before breaking back down below it, but if JPM can break through $36, it could easily get to $41 (there are a lot of minor resistance levels it may need to clear in between) and potentially baby-step to $42, before it could get above $45 a share (once again a lot of minor resistance levels in between the 42-45 range as well). JPM has a lot of minor and major resistance as it is said for be one of the stronger banks, and did not experience the downside many of the other financials did.
MS looks as if it tried getting to its resistance around $29.50 today before it sold off. A rather sloppy chart, MS looks like if it could clear $30 and fill the gap to $32, it could easily get to $34, if it fills the next gap and gets to $36 MS could be smooth sailing until $40 a share.
WFC actually traded down after hours, as I think people were surprised to see them so high on the list for more capital. However looking at the chart WFC will need to clear $28 a share which is did Thursday morning before selling off like BK and JPM. If WFC can get above $28 a share, it could easily get to $29 before testing resistance at $31.25, then $32.50, and then $34.50. However there are plenty of minor resistance points between $31.25 and $34.50, which could make it tough for MS to achieve any of these higher levels. MS certainly has one of the more bearish charts from all of the charts above.
Those are the charts for the major banks and their resistance points. It is extremely important (at least for the bulls like me) that we do not sell off after 1 PM, as it seems this has been the trend for the last 6 months when any long awaited news comes out. Some advice would be to take some profits if you're up, as any of these charts should be clear to you that the gains in the last month alone cannot keep going like this, and should be trimmed.
Disclosure: Long AXP, BAC, GS, V