Lloyds, similar to Bank of America (NYSE:BAC) a few years ago, is now free from any government control, which is favorable to the market.
Shares of Lloyds have been on a tear lately, up 14% in the last month. I have been a long-time bull since last year when the stock plunged on Brexit fears. Nearly one year later and the share price is almost flat.
Where does Lloyds Banking Group trade from here?
For an answer to that let's take a look at the charts.
The chart above represents a two-year daily time frame. One can see the devastating sell off one year ago to the $2.50 level with the surprise news of Brexit. The stock then recovered to the $3.40 level and then sold off in October back to $2.52 where it made its long-term bottom.
I wrote an article recommending Lloyds as a strong buy in November 2016, stating that I believed it would rally 90% from the $2.90 level. Interested investors can read that piece here.
Technically, LLoyds price action is very strong although it looks like it may be time for a slight pause. I reiterate my long call to $5 a share and believe it will hit that level by year end.
Investors looking for an entry point are in a conundrum: the stock is a good value here, however in a market wide selloff it could trade back to $3.16, where there has been strong support.
Yesterday's action in Lloyds in a 375 point down day for the Dow may be a sign of how strong the stock really is. Lloyds is under-owned by major institutions so any selloff in my opinion will be temporary as major players will be wanting in on the action.
I'm not going to go into major details in this article as it is more of an update to government ownership and a technical analysis but any one interested in the last quarter's record earnings can click here for the webcast.
The UK government exit from Lloyds is viewed as a positive by the markets. In my opinion, any significant weakness should be viewed as a buying opportunity.
Lloyds in my view is still a buy although there may be one more opportunity in the near future to buy on a market-wide selloff. My downside buy target is $3.28, $3.17 is "back up the truck" time.
I reluctantly sold my position at $3.80 this morning, locking in profits and hoping to re-buy on a pullback under $3.50. I may wind up regretting that decision: nothing worse than selling t0o early only to watch your trade be a 5-bagger.
As always, do your own research and know your exit point before making any trade.
Disclosure: I am/we are long BAC, BP, HIMX.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I may initiate a new position LYG at any time in the next 72 hours.